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Strong growth in H1 passenger numbers for lossmaking fastjet

Strong growth in H1 passenger numbers for lossmaking fastjet

Photo by Bloomberg

30th September 2014

By: Tracy Hancock

Creamer Media Contributing Editor

  

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Low-cost African airline fastjet, during the six months ended June 30, experienced a steady increase of 41.5% in the number of passengers travelling on core Tanzanian routes, with Tanzania first-half revenue growing by 96% to $19-million compared with the same period last year, noted fastjet CEO and interim chairperson Ed Winter in a statement on Monday.

"Strong underlying traffic growth in the first half of 2014 continues to demonstrate that fastjet's low-cost airline model works in the African market,” he said in the airline’s unaudited interim results for the period.

Winter noted that the growth in traffic underpinned fastjet’s belief that people across Africa were increasingly embracing the travel opportunities offered by the airline’s safe, reliable and great-value product, with a high percentage of first time flyers.

fastjet Tanzania aircraft use increased from 5.5 hours to 7.9 hours an aircraft a day during the period and reached 9.9 hours an aircraft a day by the end of August, on track to achieve the company’s target of 11.5 hours an aircraft a day, fastjet said. In addition, fastjet Tanzania’s punctuality averaged 90% arrival within 15 minutes, during the period.

Tanzanian average revenue a passenger for the period grew 39.3% to $81.65; however, first-half underlying earnings before interest and tax loss of $30.5-million, including $13.9-million trading losses in the Tanzanian operation, were recorded over the period.

Further, Fly540 Ghana and Angola had a $13.5-million adverse effect on the financial results for the six months ended June 30 of which $6.4-million was related to a foreign-exchange revaluation adjustment of US dollar liabilities.

During the period under review, less than $100 000 of fastjet cash was used for legacy Fly540 operations. Fly540 Ghana and Fly540 Angola lossmaking services remained suspended, with restructuring activity under way, while the airline disposed of its investment in Fly540 Kenya in June 2014.

However, fastjet added that the financial outlook for the Tanzanian operation remained broadly in line with management's previous long-term projections.

“Although the company had expected to be operational in Kenya by this time, owing to the delays in bringing Kenya online, focus was diverted to launching international flights to Uganda and Zimbabwe and fastjet is pleased to have brought these into operation successfully,” fastjet commented.

Winter pointed out that the airline’s additional services from its Tanzanian base in Dar es Salaam to Lusaka, in Zambia, Harare, in Zimbabwe, and Entebbe, in Uganda, linking these landlocked countries to the Port of Dar es Salaam, had proven successful and were performing well.

“Although these routes are in their infancy, there is every indication that these will develop into valuable routes for the fastjet Tanzania pan-African network.

“Prior to these routes being launched, there were no direct air services linking Dar es Salaam with either Harare or Entebbe,” Winter highlighted.

Meanwhile, during the period under review, fastjet also added further revenue streams to the business mix, including car rentals, hotels and car parking, with early indications suggesting that these services were proving popular with the airline’s customers.

"fastjet continues on its path of expansion, leveraging our first mover advantage to the benefit of our customers and shareholders," concluded Winter.

By 2015, fastjet expected to operate up to 13 aircraft in Tanzania, Kenya, Zambia and Zimbabwe, growing its reach to include South Africa and Uganda in 2016 when it would operate up to 20 aircraft. Projections for 2017 involved the operation of up to 25 aircraft, while fastjet forecast that in 2018 its fleet would comprise up to 34 aircraft.

PROGRESS TO DATE
The airline said it had clearly demonstrated that the low-cost model worked in Africa, with increasing passenger numbers stimulated by low fares, including a significant number of first time fliers.

“fastjet will become profitable by achieving a positive contribution from its operations, sufficient to fund both central costs and further growth.”

Based on strengthening performance in recent trading since the period end, the board remained confident in its strategy and now had the optimum team in place to build a successful and profitable future for its shareholders, stated fastjet.

There was now clear evidence that the business model was working and in future the company would continue to expand the network and execute its business plan.

Edited by Creamer Media Reporter

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