Fly540

Fastjet secures Nairobi base, but expansion in East and South Africa may be on hold

Fastjet has secured its entry into the Kenyan market and its first expansion outside Tanzania and access to the key Nairobi hub by throwing a lifeline to collapsed local carrier Jetlink Express.

The two carriers signed a memorandum of understanding (MOU) on 28-Jan-2013 to create a joint venture allowing fastjet to launch its brand in Kenya in the next few months.

Fastjet launched two domestic routes from Dar es Salaam in Tanzania in Nov-2012 with A319 aircraft, rebranding and refleeting its newly acquired Fly540 operation in the country. The carrier also owns the Fly540 regional operations in Angola and Ghana.

The bigger Kenyan market will provide a strong launch pad for further Eastern African expansion, including the development of links with international carriers which are already being explored.

Nigeria's government talks of rebuilding a failing airline industry in 2013. But the path is unclear

Nigerian aviation industry is at its lowest ebb in 20 years following a year that saw a crash kill 163 people, the collapse of a major airline and a domestic financing ban on the country’s two remaining largest carriers, one of which was also temporarily grounded by industrial action allegedly over outstanding debts.

Faced with a market that has been reduced to an effective duopoly between Arik Air and Aero, along with the associated very high air fares and often systemic corruption, the Nigerian Government is talking of pulling out the stops in 2013 to encourage more investment in the scheduled aviation sector – including fast tracking registration of four new unidentified airlines and the establishment of a new national carrier.

Both these initiatives were to have been fulfilled by the end of 2012, but have failed to meet the deadline.

African airline start-ups hold the key to unlocking the continent’s riches

Africa’s potentially rich aviation pickings are attracting a new breed of start-ups. Some, like Starbow and FastJet, have ambitions to develop pan-African networks through franchise models. Others, including Africa World Airlines and Korongo Airlines, are focused on their domestic markets and regional services to neighbouring states. Yet a third grouping, led by ECAir, have established inter-continental operations.

While several of the start-ups are backed by their respective governments, it is notable that the strongest contenders are either largely or wholly privately owned and funded.

This new generation of carrier could provide the answer to Africa’s lack of domestic and intra-continental air services by increasing route options, lowering fares and making air travel affordable to the growing middle class.

Aviation enjoys a natural advantage as a means of connecting cities, where most of Africa suffers from poor or non-existent ground transport infrastructure.

FastJet takes to the air, promising a modern pan-African network

Africa’s newest airline, FastJet, launched services on 29-Nov-2012 with two daily flights on two domestic routes in Tanzania, Dar es Salaam to Kilimanjaro and Mwanza, using three leased A319s. The launch was delayed by a month and the low-cost carrier has started on different routes than announced in Oct-2012, when Dar es Salaam-Nairobi was favoured, and on the opposite side of the continent than originally envisaged in Jun-2012, when Accra in Ghana was seen as the optimum starting hub over Tanzania.

FastJet will gradually spread its wings west and south across sub-Sahara Africa, rebranding the pan-African Fly540 operations which it acquired from African conglomerate Lonrho in Jun-2012 and transitioning the operation from the full service to LCC model. The carrier is relying on an average fare of USD70 to USD80, historically low by intra-Africa standards, to stimulate demand and encourage Africans to swap road travel for air travel, as has been the experience in other emerging markets such as Southeast Asia and Latin America.

Ghana’s Starbow plans international expansion ahead of Fastjet launch

Ghana’s Starbow is preparing to launch in Jul-2012 short-haul international services with its existing fleet of BAe 146s and is aiming to add medium-haul flights in 2013 after it takes delivery of A319s or Boeing 737-700s. The expansion will result in intensifying expansion in the fast-growing Ghanaian market as LCC Fly540 Ghana similarly looks to launch international routes from its Accra hub under the new brand Fastjet and under its new partnership with easyGroup, the latest project of easyJet founder Sir Stelios Haji-Ioannou. Both Starbow and Fastjet have ambitions to establish a franchise of LCCs or hybrid carriers throughout Africa, an underserved region the two groups believe are poised for explosive intra-regional growth through the stimulation of low fares and introduction of high frequency reliable service.

Starbow launched services in Sep-2011 and currently operates three domestic routes connecting Ghana’s capital Accra with Kumasi, Takoradi and Tamale. Fly540 Ghana launched services in Nov-2011 and operates on the same three routes. While Starbow’s current fleet is significantly larger, with four BAe 146s compared to Fly540 Ghana’s single ATR 72, both carriers operate relatively similar schedules.

Opportunities and challenges as Fly540, first pan-African airline, adopts Stelios' FastJet brand

While Stelios Haji-Ioannou may help give Africa its first low-cost carrier franchise in the form of FastJet, growth should not be expected to occur at the same pace as Stelios' easyJet operation, even if FastJet targets an eventual goal of 12 million passengers annually, which could require upwards of 30 to 40 aircraft. Infrastructure and regulatory challenges in Africa are notable and the general lack of liberalisation across the continent means FastJet will be tied to the antiquated system of bilateral agreements that protect national interests, which remain high at the dawn of a revitalised era in African aviation, spawned by increasing GDP growth and investment.

It is not difficult to see the long-term potential, but in the short-term FastJet will start conservatively. FastJet is due to launch later this year by taking over the operations of Fly540, a pan-African full-service carrier with operations in Angola, Ghana, Kenya and Tanzania. The re-branding will coincide with the adoption of a LCC model and shedding Fly540's primarily regional aircraft for Embraer E-jets or Airbus A319s, smaller than the typical LCC use of A320s and Boeing 737s.