African low-cost carrier Fastjet has struck a deal to sell its stake in loss-making Fly540 Kenya for a nominal fee and is considering replacing it with a new venture, Fastjet Kenya.

Fly540 Kenya formed part of Lonrho Aviation, a legacy business that Fastjet acquired to establish itself in the African market.

“After a thorough and lengthy evaluation of Fly540 Kenya, we concluded that converting the business into the Fastjet low-cost model would not be economically viable,” Fastjet CEO Ed Winter said.

The stake is being acquired by Fly540 director Don Smith, who last year ended up in a legal battle with Fastjet over alleged unpaid debts. This dispute was ultimately resolved and Smith continued as CEO of the Kenyan business.

Winter described the sale negotiations as complex and said the agreement removes Fly540 Kenya from the Fastjet group, which will take a $10 million write-down on the sale.

“Disposing of our investment in Fly540 Kenya allows us to pursue our priority objective of creating Fastjet Kenya as a new entity which will operate to the same low-cost model, international standards of safety, reliability and punctuality as Fastjet Tanzania—and utilize the same commercial strategy and distribution platforms. Further information on the company’s plans to launch Fastjet Kenya will be announced in due course,” Winter said.

Fastjet launched its own-branded Airbus A319 low-cost operations from Tanzania in November 2012. Besides Fly540 Kenya, it also owns Fly540 Angola and Fly540 Ghana, although both of these have been grounded to curb losses.