Struggling African low-fare operator Fastjet has secured US $12 million in emergency capital funding to help it stave off immediate concerns over its ability to continue operations.
The budget airline launched by easyjet founder Sir Stelios Haji-Ioannou (who now only holds a 3% share) warned earlier this week that it could go bust. A share sale announced today (Friday), however, is expected to raise $7 million, while its largest shareholder Solenta Aviation of South Africa will contribute an additional $3 million. Up to a further $1.6 million may be raised via an open offer.
During the week the carrier, which launched operations in Tanzania in 2012, revealed it had just $3.3 million in cash left. Although by no means out of the woods yet, the company now says the new funds will provide it with “sufficient working capital for the remainder of 2018.”
Fastjet has also confirmed an annual group operating loss of $25.3 million and a fall in revenues from $68.5 million to $46.2 million for the year ended 31 December 2017. It has been on a major cost-reduction exercise since last year in a bid to turn things around, including implementing a right-sizing strategy with regards to its fleet. Operating costs have been cut by 47% and overhead costs by 58%.
The refleeting process started during 2017 has since seen it get rid of three 145-seat Airbus A319s (in January 2018) and operate instead two 104-seat Embraer E190 aircraft in Tanzania, plus two E145s between South Africa and Zimbabwe and an E145 in Mozambique. It is also due to receive three 70-seater ATR72s turboprops in September this year.
Right-sizing
Benefits of the right-sizing have seen fastjet’s Q4 2017 load factors improve by 17% year-on-year to 77%; while Q4 2017 unit revenue increased by 27% year-on-year. Revenue per seat was up 30% to $60.9 (from $46.9).
Half of the net proceeds from the capital raised this week will be allocated to support the working capital requirements of the airline’s Zimbabwe and Mozambique operations, and to repay certain loans. The balance will be used to support operations in Tanzania and for continued preparations for the launch of services in South Africa.
It was also confirmed that Mark Hurst, currently CEO of Solenta Aviation, will join the board of fastjet from 2 July 2018.
Nico Bezuidenhout, fastjet’s CEO, said: “I am confident that healthy GDP growth, improved trading and expected passenger growth across our markets will all play a significant role in fastjet’s development during 2018. This, together with the planned introduction of our new ATRs, expected further network growth in Mozambique and the ongoing impact of the Stabilisation Plan, should enable fastjet to be cashflow positive during the second half of 2018 and will drive our continued progress as Africa’s leading low-cost airline.” The ATRs, said the CEO, would enable the carrier to “gain access to runways and markets previously inaccessible due to the group’s former jet-only operations. These aircraft will also complement our existing Embraer type aircraft, which have 50 and 100-seat capacities.”
