Posted on: 03 October 2016 by Mark Howells
fastjet has entered into a binding sale agreement with Avtrade Limited for the latter to purchase the airline’s sole owned Airbus A319 for $8.0 million with a 10% deposit payable on signature of the agreement and the balance on delivery.
The agreement includes an option to continue to operate the aircraft until 17 October 2016 with a reduction in proceeds of $200,000 for a usage of up to 100 cycles. The proceeds from the sale will be utilised as working capital for the implementation of fastjet’s Stabilisation Plan as outlined in the company’s interim results announcement for the six months to 30 June 2016, published on 20 September 2016.
That interim report included the news that fastjet is reducing the size of its fleet and is transitioning from the A319 to smaller aircraft, a move which the company expects to yield a cost reduction of approximately 15% in areas including fuel, maintenance, handling and navigation charges.
The decision to switch came from a thorough review of the group’s operations and organisational structure undertaken by Nico Bezuidenhout following his appointment as CEO on 1 August. The transition from the existing aircraft to the replacement fleet will initially be arranged through short-term wet leases (aircraft, crew, maintenance and insurance). It is intended that the wet lease arrangements will be superseded by dry leases (aircraft only) in the first half of 2017.
“The sale of our Airbus A319 is an important step in our Stabilisation Plan and our move towards a more appropriate size of fleet. It’s early days but the plan is progressing well and the money raised from this sale will be used to drive its continued implementation,” Bezuidenhout remarked.
Bezuidenhout reviewed the capacity requirements of the business and concluded that an alternative aircraft type, with materially lower operating costs, is more appropriate for fastjet’s market. Embraer and Bombardier 80-120 seat aircraft have been identified as more appropriate for fastjet’s services.
The first aircraft under a wet lease agreement — an Embraer E-Jet — is scheduled to come into service during the first half of October 2016. No decision has yet been made on the model that will be used in the long-term.