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Aeropolitics, Airline Management, Airline Restructuring, Regional Aircraft, Regional Airlines, UPDATES

Possibly the ‘WORST AIRLINE’ in the world today financially, South African based Fastjet Group (once a LCC with 3 x A319’s, ex-Fly540), now just a point to point regional 2 x E190’s, 3 x ERJ145’s. Just received $10 million from shareholders to stay alive, after losing $48 million in 2016 on revenues of $68.5 million (-70% loss margin), and in 2017 it lost $24.5 million on revenues of $46.2 million (-53% loss margin) while it received $72.8 million in new investment in the same year along on top of its $35.2 million in debt. With cash balance down to $3.3 million on June 18, 2018 it was on the verge of collapse, having “burned” $16.7 million in 6 months and the investors have saved its ass again, but WHY? This fastjet has lost $303.4 million since 2012 on revenues of $308.1 million (-98% loss margin), and retained earnings at the end of 2017 were at a negative $338.5 million? its yield ($/RPK) is lower than its CASK, for a 108% breakeven load factor? Yet more money is forthcoming? as are 3 new ATR-72-600s’ to add more capacity and it wants to buy South Africa’s regional airline, Federal Air (aka FedAir, runs 18 x CE-208’s to Beech 1900D’s)? WHERE is the light at the end of the tunnel for this LOSER?

Read my regular Articles and Posts on LinkednIN:  https://www.linkedin.com/in/tomas-chlumecky-3200a021/

 

July 9, 2018

 

 

Tomas’ Comment:

 

So Fastjet gets another $10 million? this is the troubled airline that lost a ridiculous $48 million in 2016 on revenues of $68.5 million (-70% loss margin), then came in a new team in August 2016 and got rid of its 3 x A319’s and abandoned its LCC model (?) and switched to 2 x E190’s and 3 x ERJ145’s, and yet in 2017 it lost $24.5 million on revenues of $46.2 million (-53% loss margin)? bringing the total loss of the airline to $303.4 million since 2012 on revenues of $308.1 million (-98% loss margin), making it surely the THE WORST AIRLINE IN THE WORLD today?

 

In 2017 the shareholders invested $28.8 million in January and then another $44 million in September? so a total of $72.8 million in new investment in 2017, and down to $20.0 million in cash by the end of 2017.

 

The airline hides its numbers, but what I have piece is scary, they produced 537M ASK’s, 416M PRK’s for a good 70.0% load factor, but while CASK was $0.1203 BUT PRASK was just $0.0787 for a loss of $0.0416 per ASK, because their yield is very low at $0.1110 per RPK, so breakeven load factor is 108%! yes its

 

This airline is in BIG trouble and throwing good money at it is highly questionable, it’s NOT even close coming to a profitable airline anytime soon, after 22 months of new management it should be further along in its restructuring, its sadly a joke! and yet more money is being thrown at it? when retained earnings at the end of 2017 were a negative $338.5 million? that is what the shareholders have lost since its 2012 when it was started?

 

It started in June, 2012, Rubicon Diversified Investments Plc (later renamed Fastjet Plc) completed the acquisition of Lonrho’s airline division for a transaction value of US$85.7m, satisfied by the issue of Rubicon ordinary shares to Lonrho. Key shareholders in the enlarged company would be Lonrho and Sir Stelios Haji-Ioannou, through his easyGroup Holdings Limited.

 

The airline division acquired included the African regional airline Fly540, operating in Kenya, Sudan, Tanzania and Uganda, which would form the platform for the development of a low cost carrier for Africa, branded ‘Fastjet’ under the terms of the easyGroup brand licence agreement.

 

By June 18, 2018 cash was down to $3.3 million (down $16.7m in the first 6 months of 2018), “burning” $US 2.8 million per month on average, I don’t get it, the single biggest shareholder is Solenta Aviation with 29.91%, which is a big aviation operator and lessor operating 38 aircraft from Beech 1900D’s, ATR-42/72, ERJ-135/145’s with many of the ATR’s operating for DHL with AOC’s in Gabon, Cote’Ivoire, Kenya, Zimbabwe and Mozambique, its VEO Mark Hurst is taking charge now of operations in Zimbabwe and Mozambique, they lease the ERJ145’s to fastJet and have to be worried about where this is all going, it is a lot of BIG money going down the drain right now.

 

 

https://www.fastjet.com/en

 

 

http://www.solenta.com/

 

 

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Fastjet Group has set its sights on entering the South African market in 2019 after having secured approximately USD10 million dollars worth of fresh capital.

 

Following a warning to shareholders last week that it was facing a catastrophic funding crisis, the African low-fare carrier group said on Friday, June 29, that it had now successfully placed 66,495,310 new ordinary shares, priced at GBP0.08 (USD0.11) per share, to raise GBP5.3 million pounds (USD7 million). It also reached a deal with its largest singular shareholder, Solenta Aviation Group, wherein the South African ACMI/charter specialist subscribed to 28,924,538 new ordinary shares raising gross proceeds of GBP2.3 million (USD3 million).

 

With Solenta Aviation Group’s increase in shareholding, the CEO of Solenta Aviation, Mark Hurst, will join Fastjet’s board as a Non-Executive Director where he will be working closely with CEO, Nico Bezuidenhout, on an ongoing basis. A Zimbabwean, Hurst will also be responsible for the country management of Fastjet’s Zimbabwe and Mozambique operations.

 

The two transactions combined, Fastjet says it raised gross proceeds of GBP7.6 million (USD10 million). As of June 18, Fastjet’s cash balance stood at just USD3.3 million.

 

In its recently published FY2017 results, Fastjet issued a further update on its stabilization plan given what it said was the “challenging” current economic and trading outlook for its Tanzania, Zimbabwe, and Mozambique (through Fastjet Mozambique) operations.

 

 

In the short-term, the Group has deferred the induction of its three ATR72-600s until September of this year. The Avions de Transport Régional turboprops will likely be deployed into service with Fastjet (FN, Dar-es-Salaam) to cater to the Tanzanian market as well as with Fastjet Zimbabwe (FN, Harare Int’l) where the carrier has now been granted rights to the Harare Int’l-Bulawayo route, previously the sole preserve of Air Zimbabwe (UM, Harare Int’l).

 

In light of the difficult outlook for operations north of the Limpopo River, the Group has now turned its attention to the South African market where, earlier this year, it commenced the process of exercising its option to acquire local carrier and brand licensee, Federal Air (7V, Durban Virginia).

 

 

“The intention, beyond this current financing, is for the Company to explore financing and/or joint venture options in South Africa to support full-scale entry into that market,” it said. “As the largest aviation market in Africa, the Board believes that South Africa, particularly routes to and from Cape Town, is[sic] strategically important to Fastjet, which can utilize the current FedAir platform as well as fastjet management’s relations and track record in the country.”

 

The Federal Air (aka FedAir, operates 18 aircraft from CE208’s to Beech 1900D’s) acquisition is dependent on all relevant South African regulatory requirements being met and completed. The Group expects to commence Fastjet South Africa-branded services in South Africa no later than early 2019, subject to obtaining the suitable additional aircraft for its fleet and the associated financing.

 

 

 

—————————————————————————————————————————————

Fastjet Annual Report and Accounts 2017 (H)

 

Strategic Report Annual Report 2017-Fastjet

 

Fundraising

 

In January 2017 fastjet embarked on a fundraising exercise, which raised gross proceeds of US$28.8m. At the
same time the Company also entered a strategic partnership with Solenta Aviation Holdings Limited (“Solenta”),
a South Africa based operator of one of the largest African aircraft fleets. Under this agreement, Solenta provides
and operates aircraft on a reduced cash cost, “wet/dry-lease” basis for fastjet and supplies other aviation
services. It is an exciting and positive strategic partnership for fastjet as this agreement allows us to leverage
Solenta’s existing African business whilst simultaneously providing the platform to grow and scale fastjet flexibly
and cost effectively.

In September 2017, fastjet announced a further funding exercise, raising gross proceeds of US$44m to support
its growth initiatives, allowing it to enter the Mozambique market and to purchase an option right on the three
ATR72 aircraft noted above.

The Board is grateful to all shareholders who participated in these fundraising exercises for their continued
support.

Financial Performance

The Group recorded a significantly reduced loss for the year of US$24.5m (2016: US$67.7m pre-discontinued
operations), which included the costs of an unexpected engine event with our last A319 towards the end of the
year (US$6.9m) and a significant bad debt write off of $2.5m. The results for the year reflect the positive effect
of the Stabilisation Plan, which commenced in August 2016. The reduction in capacity, suspension of loss-making
routes, relocation of the head office to Johannesburg and the various other cost-saving initiatives contributed to
this material improvement in bottom line performance, which is fully explained under the Stabilisation Plan
section below.

As a result of the operating loss for the year, the cash costs associated with the aircraft return conditions and
onerous lease contracts, which had been previously provided for, and an unexpected engine event with the last
A319 aircraft prior to its return, the Group incurred a 2017 operating cash outflow of US$34.8m (2016:
US$52.3m). Supported by the two capital raises the year end cash balance was US$20.1m (2016: US$3.6m). At
18 June 2018, the Group’s cash balance was US$3.3m reflecting the purchase of equity in the three ATR72 aircraft
(Further supported by a Solenta Loan), further operating cash outflows and a creditor reduction.

Following the loan swap agreement announced on 5 June 2018, cash balances of US$1.75m held in Zimbabwe are currently
restricted due to lack of foreign exchange liquidity in the country. In order to mitigate this, we announced in
June 2018 that fastjet entered into a loan swap agreement of US$5m in Zimbabwe in order to make available
US$2m of the restricted cash held within Zimbabwe. Although the Group is operating on a more stable footing
the Board determined that additional equity should be sought to provide additional working capital.

As referred to in the Chief Executive’s Statement above, the Board can confirm that it has received non-binding indications
of interest from existing and potential new investors to invest, in aggregate, not less than US$10m.
Despite the progress made in implementing the Stabilisation Plan, the Directors believe that the current
economic and trading outlook in fastjet’s key markets of Tanzania, Zimbabwe and Mozambique remain
challenging.

In 2018, the Group is expecting to deploy its newly acquired ATRs, possibly into the Tanzanian
market, as well as on the additional Bulawayo-Zimbabwean route. These initiatives inevitably have operational
and financial risks and challenges, which the Board is confident it can manage. Having considered these
challenges and risks carefully, the Directors have continued to adopt the Going Concern basis in preparing these
Financial Statements.

Further details of the key assumptions and risks that the Directors have considered in concluding that the
continued adoption of the Going Concern basis is appropriate???

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 30+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (50+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems in the business for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com I write a lot of Articles and Posts on LinkedIN: https://www.linkedin.com/in/tomas-chlumecky-3200a021/

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