Fastjet hits rough patch

Dar es Salaam. Fastjet has run into trade crosswinds that threaten its survival should shareholders not come to the airline’s rescue by October, it has emerged.

The airline’s parent company in the UK said it needed more cash within a month to continue operating, sending its shares at the London Stock Exchange tumbling by more than half their value.

The budget airline issued the SOS Wednesday, citing deteriorating business in Tanzania which accounts for 70 per cent of the airlines income.

“The company is currently in active discussions with its major shareholders regarding a potential equity fundraising, in the absence of which the group is not able to continue trading as a going concern,” it said in a statement.

Fastjet’s shareholders include activist M&G Investments, Janus Henderson and South African carrier Solenta. It was founded by Haji-Ioannou, the son of a shipping magnate who modelled it on the likes of no-frills airlines easyJet and Ryanair.

The company said talks with some shareholders had been positive and discussions were ongoing, though it did not guarantee success.

However in Dar es Salaam, Fastjet Tanzania Ltd management allayed fears of an imminent collapse, assuring customers services will continue normally. General manager Derrick Luembe told The Citizen in an interview yesterday that there was no cause for alarm in the wake of the news coming out of London.

Mr Luembe even welcomed the decision by his boss in London, Mr Nico Bezuidenhout, to immediately end injection of any more funds to help sustain the Tanzania unit.

In a memo to employees, Bezuidenhout said the company was evaluating its Tanzanian operations which have faced regulatory bottlenecks and falling business amid stiff completion by other operators.

The airline is citing excessive capacity, delay by authorities in clearing the deployment of its three ATR72-600 aircraft with a capacity of 68 passengers each and general economic slowdown that has held back travellers despite “unsustainable low pricing.”

Fastjet currently runs Embraer E190, whose carrying capacity is 104 passengers each. Sources within the company also claim the airline has been restricted to particular routes, a claim that Tanzania Civil Aviation Authority has denied in the past.

During the telephone interview, Mr Luembe said the move to be delinked from London is an operational advantage that will see the local office save more than $300,000 (Sh690 million) monthly.

“Fastjet Plc detaching from Fastjet Tanzania Ltd should not worry the public because for some time now we have been operating on our own,” said Mr Luembe.

“We are now going to become much more efficient and responsive. Our customers will keep on getting the same quality of service and maintain our on-time record performance.”

The general manager said the company would no longer pay substantial amount (not quantified) to the parent company as management fees. He expounded that the move would also reduce regulator burden from UK.

“The airline will now sign all its contracts locally thus giving room to get competitive prices,” said Mr Luembe.

On the delay to clear the ATRs, he said the matter was procedural and hoped the hurdle will be cleared. “We could not get the routes that we are planning. But this is a regulatory matter,” said Mr Luembe, noting that the airline intended to get an expanded air service licence that gives more routes.

Mr Luembe said already TCAA has approved the company’s business plan for expansion of its routes.

TCAA public information officer Bestina Magutu said FastJet’s request would be discussed during the stakeholders’ public hearing slatted for November 28, 2018.

Fastjet operates in Tanzania, Zambia, Zimbabwe, Mozambique and South Africa. In September last year, it looked to raise $44 million but could only manage to raise $28 million.

The airline also posted a bigger half-year operating loss of $14.6 million on Wednesday, from a loss of $13.2 million last year.