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Fastjet Eyes Expansion As Africa Low-Cost Air Travel Takes Off
By Sarah Young
30/04/2014
LONDON (Reuters) - A phone call from budget airline pioneer Stelios Haji-Ioannou, a little internet research and less than three years later fastjet has targeted $500 million in annual revenue from a 24-aircraft business across eastern and southern Africa by 2018.
"Stelios gave me a call. We spent an afternoon Googling Africa, African aviation, African economics," Fastjet Chief Executive Ed Winter told Reuters on Wednesday.
Now Fastjet is seeking to replicate in Africa the model of Haji-Ioannou's other airline project, easyJet.
Haji-Ioannou, more commonly known as Stelios, founded low-cost carrier easyJet in 1995 but quit the board in 2010 after a row over strategy. It was there that he met Winter, who was easyJet's chief operating officer before leaving in 2006.
With just three aircraft, fastjet is currently a loss-making minnow listed on London's junior market with a capitalisation of 31 million pounds ($52.2 million).
Underpinning confidence in its expansion plans, however, is the success of its Tanzania operations, which Winters expects to become cash-generative in the near future, having taken its maiden flight in 2012.
"We've actually managed to prove the low-cost model works in Africa," said Winters, who owns 2.5 percent of the company.
"We've managed to stimulate the market, we've pushed the yield up to where it needs to be and the one thing we now need to do is utilise our aircraft a little bit harder."
Doing that will involve more routes to Kenya this year and establishing bases in that country as well as South Africa and Zambia.
To fund it, the company has raised 11 million pounds from a placing plus a possible 4 million pounds from an open offer.
Stelios's vehicle easyGroup participated in the placing, investing 1 million pounds to become fastjet's biggest shareholder with more than 11 percent. [ID:nL3N0N241N]
"Stelios doesn't very often put money into his businesses ... and to switch out of his management fee into shares, it shows a lot of confidence in the business," said Winter, whose son works as a pilot for easyJet.
Stelios has about a 36 percent stake in easyJet. He frequently disagrees with the airline over issues such as fleet expansion, executive pay and dividend policy.
Steering clear of easyJet's distinctive orange, fastjet, a name Winters says Stelios came up with, has opted for grey and yellow branding inspired by the African grey parrot.
Mobile phones, payments via sim cards and social media encouraging new passengers - many of them first-time flyers who would previously have travelled by bus - have helped fastjet to generate ticket sales in Tanzania.
Winter, who is confident of delivering on a target to fly 24 planes and increase revenues by about 800 percent in the next four years, said that expansion in the medium term could well require further funding, though there are no such plans at the moment.
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