Updated: Dec 5, 2019
The African market has proven to be a challenging environment where low-cost carriers (LCCs) are concerned. This may be attributed to protectionist economic policies pursued by African states that curb the expansion of airlines even where certain routes are considered viable. Additionally, the high government taxes and related fees airlines have to contend with mean these costs are often passed on to the consumer, which when compared to other world regions, may not at all be in line with the entire idea of low-cost travel. According to the World Economic Forum, LCCs account for about a quarter of flights globally, but barely hit the 10% mark in Africa. Most of these are found in South Africa, with the likes of Kulula, Mango Airlines, and Comair.
Enter Fastjet Plc Group, a British registered firm, which in 2012 made its African debut in Tanzania. Fastjet prides itself in being a punctual, reliable, and affordable carrier, having flown over 3 million passengers since 2012, winning the Skytrax World Airline Awards Best Low-Cost Airline in Africa 2017, and having an on-time performance above 90%.
Through the years, Fastjet grew to be one of the continent's most recognizable LCCs, which at its peak had operations in Tanzania, Mozambique, Zimbabwe, and South Africa. However, the Group's only remaining strong base is in South Africa, which operating as FedAir, is expected to remain profitable in 2019. Fastjet Tanzania suspended its operations in December 2018 while Fastjet Mozambique suspended flights in October 2019. The fate of Fastjet Zimbabwe hangs in the balance following a restructuring proposal put forward by the Group's Board on 27th November 2019 where Fastjet Zimbabwe may be disposed of. So what happened to Fastjet in these 3 African countries?
Following disappointing performance in the first half of 2018, in part due to fresh competition from Air Tanzania, Fastjet Plc hinted at the possibility of selling its 49% stake in Fastjet Tanzania, and later made the sale on 26th November 2018. Only a month after changing ownership from Fastjet Plc to Fastjet Air Tanzania, Fastjet Tanzania suspended all operations within its network on 17th December 2018. This included flights from Dar-es-Salaam to Mwanza, Kilimanjaro, Mbeya, Harare, and Lusaka. The suspension followed a 28-day notice given by the Tanzania Civil Aviation Authority (TCAA) for the airline to resolve its management problems, which included the transition of accountable management, the airline's re-fleeting, and ensured sustainability.
In June 2019, Fastjet Tanzania cleared a TZS7 billion (approx. US$3 million) debt it owed to the TCAA and other service providers, in addition to the submission of a business plan to the regulator. Still, this did not appease the TCAA as its application for a new Air Services Permit (ASP) was rejected, and the matter deffered to 27th November 2019. This was however not to be, as the airline was declared insolvent and its liquidation over TZS2.02 billion ordered by a Tanzanian court days before the date set for the application of a new ASP.
Concurrently going through its woes was Fastjet Mozambique which effective midnight 26th October 2019, suspended its operations, including flights under its codeshare agreement with Mozambican national carrier Linhas Aéreas de Moçambique (LAM Mozambique Airlines). This, according to the airline's April Trading Update, was due to the entry of Ethiopian Airlines as a domestic carrier in Mozambique, leading to an increase in aircraft and hence oversupply in the market. This was further compounded by Cyclone Idai which badly affected Mozambique in March 2019, leading to decreased passenger demand and the airline's scaling back on local routes. The airline therefore reported a first half revenue of US$1.9 million, compared to US$4.2 million in the similar period of 2018. Fastjet Plc however expressed its continued commitment to the Mozambican market, and that should the situation improve, a return to operations should be expected.
In its November 2019 Trading Update, Fastjet Plc's Board proposed a restructuring of the entity as despite "significant financial and operational improvements in performance, it continues to make losses and expects a post-tax loss of US$7 million to US$8 million for the full year 2019." Therefore, according to the Board, the Group will require further funding by the end of February 2020 in order to sustain operations.
The proposed source of revenue is the disposal of loss-making Fastjet Zimbabwe, which has been plagued by uncertainty and macroeconomic volatility in the Zimbabwean market. Solenta Aviation Holdings Limited which owns a 60% stake in Fastjet Plc, coupled with a consortium of local investors, would purchase Fastjet Zimbabwe for approximately US$8 million. Furthermore, the investor consortium will raise and fund Fastjet Zimbabwe's US$5.4 million of current liabilities and US$3.2 million of future aircraft capital expenditure.
Additionally, the capital received would be used to settle the remaining Fastjet Plc liabilities and upon completion of the restructuring, the Group would consist of FedAir, the fastjet brand, and fastjet Africa (which owns Fastjet Mozambique). Fastjet Plc would then be contracted by Fastjet Zimbabwe to continue providing the brand name and airline management services. It would then only aim to directly own airlines once they were generating cash and profits in order to "avoid Africa's sometimes uncertain trading environment."
For Fastjet Zimbabwe, this in the backdrop of the recent launch of flights between Harare and Johannesburg by Fastjet Zimbabwe, and the scheduled December 5th launch of flights between Johannesburg and Bulawayo to be operated by an Embraer ERJ-145 11 times weekly.
With policy developments such as the Single African Air Transport Market (SAATM) taking centre stage in the African aviation industry, one can only hope for an increase in LCCs operating intra-African routes. Such a development in this industry would greatly increase and ease mobility within Africa and help in catalysing the region's economic prosperity.