Fastjet soars on international routes approvals
14-Jun-2013 African airline Fastjet (LON:FJET) is set to achieve a long-held strategic aim of being a cross-border operator, as it has been given permission to operate routes from Tanzania to South Africa, Zambia and Rwanda.
The route approvals have been granted by the relevant governments under the Bilateral Air Services Agreements between Tanzania and the other countries, and represent a major breakthrough for the low-cost airline.
"This is a monumental day in Fastjet's history and brings us closer to our goal of becoming Africa's first pan continental low-cost airline," said Ed Winter, chief executive officer of Fastjet.
"To date our growth has been inhibited by lack of international routes in our network. We have expended huge effort over the past six months in obtaining these rights and we can only thank the government and population of Tanzania who have lobbied hard to allow us to gain access to the bilateral rights to operate to these countries," Winter added.
The airline plans to announce launch dates for flights to Johannesburg, Kigali and Lusaka from Dar es Salaam soon.
The route to Johannesburg from Dar es Salaam is expected to be an especially popular route, with the company set to offer a low-cost alternative to the service offered by South African Airways.
Winter said Fastjet would offer "substantially more affordable fares to customers" than South African Airways, and Fastjet's chief commercial officer Richard Bodin revealed early booking passengers fares could be as low as US$100 (one way excluding government taxes and charges).
The airline already operates national services in Tanzania, Ghana and Angola and had planned to launch a service between Johannesburg and Cape Town in South Africa on 1 July; the launch of the Cape Town to Johannesburg route has been put on hold, so that Fastjet can direct all its efforts and resources to starting its international services as soon as possible.
Ed Winter added: "Bringing the Fastjet brand to South Africa is a cornerstone in the creation of our pan-African network. We remain totally committed to launching the Fastjet brand in South Africa as soon as possible, but given all the time and effort the team has invested over the past months to secure our international route designations, we have taken the sensible decision to prioritise setting up these lucrative and high profile routes first, before turning our attention to launch the Fastjet brand on domestic routes in South Africa."
On Thursday, the fast-growing airline also announced plans to start operating a Fastjet branded service in Nigeria. It signed a memorandum of understanding with Red 1 Airways to create Fastjet Nigeria, in which Fastjet will have a minority stake. Fastjet Nigeria will be funded by Red 1.
In a separate announcement, Fastjet said it has signed a new three year Equity Financing Facility (EFF) of up to £15mln with Darwin Strategic, a majority owned subsidiary of Henderson Global Investors Volantis Capital.
The company's existing EFF, signed on 22 November 2012, has now accordingly been cancelled, though not before Fastjet made one more draw-down on the facility, of £1.13mln. The draw-down saw the company issue 98mln shares to Darwin at 1.15p per share.
Earlier this week the company scrapped its convertible arrangement with US financier Bergen Global because of the potential adverse impact on the share price.
The Africa-focused airline arranged the £15.7mln convertible securities deed in March, but clearly believes the new EFF with Darwin offers a better deal.
The EFF represents a vote in confidence in Fastjet, which has been under a cloud after its auditors, KPMG, added some cautionary statements to the company's financial results, released at the end of May.
The auditor indicated that the company would probably need to raise new funds to carry on trading and added that Fastjet's prospects are dependent on improved trading, and that it needs to gain access to international routes.
The company has now gained access to additional funds, plus it has received permission to operate international routes, while traffic stats in May were the best ever for the company.
Shares in Fastjet shot up 14% to 1.34p in early trading on Friday, and are up 49% since the adverse reaction to the release of its results at the end of May.