Fastjet has applied for a Kenyan Air Service License (ASL), forming part of its four-year expansion strategy, as pressure begins to mount from its high-profile shareholder Stelios Haji-Ioannou.
Since launching its own-branded Airbus A319 low-cost operations from Tanzania in November 2012, Fastjet’s pan-African expansion has been sluggish. However, FastJet is sticking with ambitions to broaden its network from Tanzania and set up new Fastjet-branded ventures in other African countries .
Over the period to Dec. 31, 2018, Fastjet Tanzania will focus on growing its revenue, load factors and yield, while keeping tight control of costs. It will boost frequencies on existing routes—Dar es Salaam to Entebbe, Harare, Johannesburg, Kilimanjaro, Lusaka, Mbeya and Mwanza—and add new routes from Tanzania, opening destinations in Kenya (Nairobi) and Malawi (Lilongwe).
Fastjet is also looking to move ahead with its expansion into other markets. Tanzania, Kenya, South Africa and Zambia have all been earmarked as “major growth opportunities.”
The first of these likely to happen is Kenya, where Fastjet Tanzania is seeking route rights and newly created Fastjet Kenya has applied for an Air Service License (ASL). This will pave the way for its Kenyan air operator’s certificate, which will be used to open a domestic and international base in the country.
“This is an important step for Fastjet. We have submitted a comprehensive application to the authorities who have confirmed that Fastjet Kenya has entered the approval process,” Fastjet CEO Ed Winter said.
Fastjet was previously active in the country through Fly540 Kenya, but this division was sold over the summer. At the time of the disposal, Fastjet said it was not “economically viable” to transition Fly540 Kenya from a regional to a low-cost model. Sources familiar with the situation told ATW that ties were severed because Fly540 Kenya caused “too many issues.” The stake was acquired by Fly540 director Don Smith, who last year ended up in a legal battle with Fastjet over alleged unpaid debts.
The newly created airline is 51%-owned by an unnamed Kenyan national and the remainder is “ultimately” held by Fastjet. The ASL application, which involved the submission of a detailed business plan, was published Aug. 29 and is scheduled for a public hearing around Sept. 19.
By 2018, Fastjet expects to operate 24 aircraft and carry 6 million passengers. “This represents only a 13% market share of estimated pan-African passengers in these markets,” Fastjet said. It is also looking to form partnerships with third-party airlines flying into Africa.
“The company intends to increase pan-African reach using an airline management service franchise model to develop a pan-African Fastjet network where appropriate and in particular where we want to de-risk expansion financially or politically. Negotiations are progressing in a number of countries with interested parties,” Fastjet said. Several sets of talks have been announced in the past, but none have yet materialized.
Meanwhile, Fastjet shareholder Stelios Haji-Ioannou has fired a warning shot at the airline’s directors, criticizing their “excessive” salaries, despite a backdrop of heavy losses.
Haji-Ioannou, who owns more than 10% of Fastjet via his investment vehicle easyGroup, said: “We remain concerned at the company’s continuing losses, which in 2013 amounted to $80 million on revenues of $53 million. That’s about $2.50 of cost for every dollar of revenue. Moreover, we are concerned at the share price, which has fallen by around 84% in the last 12 months alone.”
He said Fastjet’s CEO receives $794,000 in salary and bonuses, while the CFO receives $412,000, totaling $1.2 million for these two positions alone. “If the company fails to implement such changes to correct the current unsatisfactory situation with regards to losses and excessive executive pay, we will have no option but to vote against all resolutions at the next opportunity,” Haji-Ioannou said.
Fastjet licenses its brand from easyGroup. For the financial year ended Dec. 31, 2013, easyGroup’s fees and charges totaled $1.7 million.