Money-losing African Airline Fastjet is on the hunt for a new CEO after incumbent Nico Bezuidenhout quit to rejoin his old company.
The departure comes less than a week after the carrier announced a full-year loss of $65 million, having delayed the publication of its results because of an ongoing “audit process.”
The current deputy CEO Mark Hurst will take over from Bezuidenhout on an interim basis while the company searches for a permanent successor. Hurst is CEO of Fastjet’s majority shareholder Solenta Aviation.
“On behalf of the board and myself, I would like to thank Nico for his efforts, dedication, and time invested over the last three years in favor of Fastjet and its shareholders. The Fastjet of today is a fundamentally different business compared to three years ago, and we wish Nico well in his future endeavors,” said Rashid Wally, chairman of Fastjet, said on Tuesday.
Since launching to plenty of fanfare back in 2012, Fastjet has tried a number of different formulas to make the airline profitable. It replaced larger aircraft with smaller ones and cut bases and destinations, but the business remains stubbornly loss-making. In December Fastjet grounded its Tanzanian flights and currently operates routes in South Africa, Zimbabwe, and Mozambique.
The carrier’s problems are a mixture of self-inflicted blunders and a tough external market. Moving from a fleet of Airbus A319 aircraft to smaller Embraer ERJ145s made sense, but it might have come too late in the day.
“Sub-Saharan Africa remains a challenging market for airlines,” said John Grant, partner at consultancy Midas Aviation.
“The lack of open skies also means it’s difficult to deliver the connectivity needed, and the lack of liberalization in terms of visas means it can be challenging for Africans who can afford to travel to do so freely between countries,” Grant said.
“To flourish, African aviation needs vastly improved regional connectivity, with the right sized aircraft to do that. Whilst Fastjet seemed to be taking steps towards that aim under Bezuidenhout’s guidance, the future for the carrier remains uncertain.”
The $65 million loss this year — an increase of 165 percent on the 2018 figure — is unlikely to be the end of the company’s bad news judging by the stark warnings in the most recent set of accounts.
Fastjet’s directors believe it “will have sufficient resources to meet its operational needs over the relevant period, being at least until June 2020″ but warned that “the headroom of available cash resources is minimal and the projections are very sensitive to any assumptions not being met.”
These assumptions include load factors averaging 74 percent for the second half of 2019 — they were only 72 percent in 2018 — and that “key exchange rates remain as at current levels.” In 2018 alone Fastjet recorded $8.5 million in Zimbabwe foreign exchange losses on financial assets, illustrating the difficulty in operating in that market.
Worryingly, given the increase in the price of jet fuel, the company has no hedges in place, which means that if it keeps creeping up, Fastjet could be in serious trouble.