Buffeted by transient factors
​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.
In a trading update yesterday, the company said that it was being buffeted by a longer than expected period of 'disruption' caused by October's Tanzanian presidential election. We think that it might take another 3 months before normal conditions return, but the group is now on the verge of moving into the black with a fleet of 6 A319s (1 owned and 5 leased) and a rapidly expanding route map,
More strategically, the industry's medium and long term fundamentals remain strong. The continent suffers from relatively expensive airfares (3x-4x higher than Europe), frequent delays and poor customer service. Furthermore, it has a 1 billion population that is becoming more affluent and increasingly keen to travel. Fertile ground for LCCs.
Indeed, in a very encouraging development this morning, the company has been granted approval to operate flights between Kenya and Tanzania under the Bilateral Air Services Agreement between the two countries.
Given the more cautious near term outlook, we have cut our forecasts with the share price target consequently falling from 229p to 110p/share, compared to today's level of 52p.
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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