Fastjet is bringing the low cost carrier model to Tanzania, Zambia and South Africa. It's been tough-going so far, but this venture is being keenly watched to see if it can generate enough demand to be successful.
FastJet Plc will raise 15 million pounds ($25 million) from share sales to help fund its African expansion, with EasyJet Plc founder Stelios Haji-Ioannou injecting cash in a deal giving him 10 percent of the business.
The London-based company has placed 687.5 million shares at 1.6 pence apiece, an 11 percent discount, raising 11 million pounds, and is offering 250 million shares to existing investors for a further 4 million pounds, it said today in a statement.
Chief Executive Officer Ed Winter will inject 500,000 pounds via the placing, with Chief Financial Officer Angus Saunders and other senior managers also participating. Stelios, as the EasyGroup head prefers to be known, will invest 1 million pounds and terminate a consultancy contract valued at 4.3 million pounds over eight years in exchange for 94.3 million shares valued at about 1.51 million pounds, FastJet said.
“It’s been tough — Africa is tough — but we’ve got there now,” Winter said in an interview. “We’ve established the low-cost model in Tanzania, customer acceptance is developing rapidly and we’re stimulating new markets. And the roll-out of our network is gaining real momentum.”
FastJet, which has been flying for 16 months, plans to to establish a base in Lusaka in Zambia before the end of this year, adding to its sole hub in Dar es Salaam, Tanzania. Planes may also be based in Johannesburg, the carrier’s initial international destination, which it began serving in October.
The company expects to post an operating loss of $53 million for the year ended Dec. 31, before tax and an impairment charge of as much as $25 million from the Fly540 airline operation on which it was based. Sales totaled about $47 million, with final numbers to be posted by the end of June.
Winter said FastJet is exploring options to add to its fleet of three leased Airbus Group NV A319 short-haul planes to provide capacity at new bases and more seats in Dar es Salaam.
FastJet is also negotiating a commercial agreement with Dubai-based Emirates which will allow its tickets to be sold through the larger carrier’s booking system, providing onward flights from the Gulf to destinations such as Kilimanjaro. It’s possible terms might be reached in a month or two, Winter said.
Low-cost carriers don’t typically link up with network airlines and Winter said the “hybrid” deal won’t be structured as a full code-share to avoid the complexity and cost of services such as baggage transfers at African airports.
A circular to investors providing details of the share offer will be published on or around April 16. The stock fell 6.9 percent today, giving a market value of 10.3 million pounds.
FastJet has terminated an equity financing facility with Darwin Strategic Ltd. that provided initial growth capital.
To contact the editors responsible for this story: Benedikt Kammel at [email protected] Christopher Jasper
Photo credit: FastJet, which has been flying for 16 months, plans to to establish a base in Lusaka in Zambia before the end of this year. FastJet