Additional fund raise planned for July
​fastjet is a low-cost carrier (LCC) that launched in Tanzania on 29th November 2012. It operates a single type fleet of modern, fuel efficient, jets on a short haul, point to point network.
Despite being operationally based >4,600 miles away in Tanzania, the company has also been buffeted by unexpected political headwinds over the past 9 months. Here, last October's Presidential Election triggered a precipitous decline in airline traffic across the whole industry, compounded by a 24% devaluation in the currency (Shilling vs US dollar).
Just prior to the vote, Fastjet had expanded its fleet from 3 to 6 A319 jets. Hence unsurprisingly, on the back of weaker demand and greater capacity, came news yesterday morning that the load factor for H1'16 had fallen to 47% from 70% LY, notwithstanding a 7% lift in volumes (390k).
The firm adding that "further finance" would now be sought from investors in July. With regards to the quantum, we would guess that in excess of $25m will need to be raised to provide sufficient cash for the next 1-2 years.
The good news is that a new, highly experienced CEO, Nico Bezuidenhout, is due to take the reins on 1st August, and will begin by conducting a wide-ranging review of "the size and type of aircraft operated, the routes flown, the relocation of our Head Office (in Gatwick) to Africa and revenue generation initiatives."
In terms of the financials, we have trimmed our 2016 sales and adjusted EBIT projections to $74m (vs $78m) and a $28m loss (vs -$26m) respectively, but believe that the above restructuring measures should stem cash burn in H2 (vs $15.3m during the 1st 4 months of 2016).
Fastjet is a pan-African low cost airline. Co. operates domestic and international routes in all economically viable African markets. As of Dec 31 2016, Co. had three aircraft, two Airbus A319s in Tanzania and one Solenta Embraer E145 in Zimbabwe. As of Dec 31 2016, Co. held two Air Operator Certificates in Tanzania and Zimbabwe and operated six routes.
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