14th Nov 2014 10:13
LONDON (Alliance News) - Fastjet PLC Friday said that its Zambian operation has received an air service permit from the authorities in the country, moving it a step closer to launching operations there, while it also got permission to operate flights from Uganda to Juba, Nairobi, Kigali and Johannesburg using Tanzania-based aircraft.
The company also did a shares deal in Tanzania that gives it a small Tanzanian investor base, a move that should assist it with its expansion plans as some African authorities want to see evidence of African ownership participation.
In a statement, the low-cost African airline backed by easyJet founder Stelios Haji-Ioannou, said the permit approval gives it authority to operate domestic and international flights within and from Zambia.
"The fastjet Zambia team is now focused on continuing the submission of the necessary documents and manuals to complete the application process for an Air Operating Certificate which will then allow the commencement of operations," it said in a statement.
Fastjet is based in Tanzania. It was founded when Rubicon Diversified Investments bought Fly540, which flew in Kenya, Ghana and Angola, from Lohnro in a reverse takeover in 2012. It started its own operations in Tanzania after that, and is gradually expanding into other African countries while suspending or selling the legacy Fly540 operations.
Its sold loss-making Fly540 Kenya to a director of that airline for a nominal fee, and has suspended the remaining Fly540 operations out of Ghana and Angola.
Meanwhile, it started expanding the fastjet operation by adding international flights out of Tanzania to its original domestic flights there. It started flying between Dar es Salaam in Tanzania and Johannesburg in South Africa, and then between Dar es Salaam and Lusaka in Zambia. It also signed a partnership with Lusaka-based regional airline Proflight Zambia, enabling passengers to travel between the destinations offered by the carriers.
In August, it started flying on a third international route between Dar es Salaam and Harare in Zimbawe, and in the same month incorporated its own company in Kenya with a target of starting a fastjet base there. The following month it launched its fourth international route out of Tanzania, between Dar es Salaam and Entebbe in Uganda.
Its passenger numbers have been increasing each month thanks to the new routes, and it has also added new ticketing partners like Expedia and Chinese travel website Qunar.com. It has been narrowing its losses by cutting costs thanks to the sale or suspension of the Fly540 operations.
Zambia would become fastjet's second base after Tanzania, and it plans to operate low-cost flights to various destinations in East and Southern Africa from there. It said prices on regional routes from Zambia are currently very high, especially where a monopoly operator controls the route, and it's confident its low-cost model can stimulate the market.
"Timescales before the first flight will be dependent on the time taken for the authorities to review the Air Operating Certificate application documents. We look forward to going on sale and commencing operations in Zambia once that process has been completed," Chairman and Chief Executive Ed Winter said.
The airline also said it has received permission from the Uganda Civil Aviation Authority to operate flights from Uganda to Juba, Nairobi, Kigali and Johannesburg under "5th Freedom" rights using Tanzanian-based aircraft. It now just needs approval from authorities in the destination countries before it can start flying to those cities from Entebbe.
"Since Air Uganda ceased flying, the fares offered by other carriers for flights linking Uganda regionally have risen steadily. With fares, starting from as low as USD50 plus government taxes, fastjet is confident that it will attract considerable customer support," it said.
5th Freedom, which is also sometimes referred to as "beyond rights", is the right of an airline from one country to land in a second country, to then pick up passengers and fly on to a third country where the passengers then deplane, according to the International Air Transport Association definition.
Fastjet also said Friday that it has signed a deal with Enterprise Growth Market Advisors Ltd that will allow it to sell an interest in fastjet Tanzania to Tanzanian investors, a move that should allow it to further expand to more African destinations, particularly those who require evidence of African ownership participation.
As part of that deal, fastjet Tanzania has issued 835 shares in its share capital to fastjet International Ltd, a company incorporated in Tanzania and owned by four Tanzanian nationals - Ami Mpungwe, George Carmichael Theobald, John Corse and Sophia Rwegellera. fastjet Tanzania also issued a further 17 shares in fastjet Tanzania to each of Ami Mpungwe and Lawrence Masha, the two Tanzanian non-executive directors of fastjet Tanzania.
Under the terms of the arrangement, the Tanzanian shareholders have agreed to sell their interest in fastjet International Ltd and/or fastjet Tanzania to subsequent Tanzanian investors at a price and on terms as specified by fastjet PLC.
The parent company will start looking for suitable long term Tanzanian shareholders "with the aim of fulfilling fastjet's ambition of having airline companies in strategic African jurisdictions which are part owned by nationals of the countries in which they are based to help in creating a truly pan-African airline".
"This is a positive and logical step in the implementation of our model of local investment and local finance for growth, and will aid in fastjet Tanzania being granted additional rights under Bilateral Air Service Agreements with other African countries on the continent," Winter said.
Fastjet also reiterated that it will need further funding until it becomes profitable and will need more funds for each significant phase of its expansion in Zambia and Uganda.
"The board is in discussions with a number of potential funders, including industry partners and specialist African investors, with a view to investment both at the group level and at the individual operating company level. The company is aiming to complete this necessary funding by early in the New Year," it said.
The airline raised GBP14.9 million in a share placing and open offer earlier in the year with Stelios' easyGroup IP Licensing Ltd agreeing to invest GBP1 million in the placing.
Fastjet shares were up 3.5% at 0.750 pence in London Friday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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