FastJet considers expansion options in SA
FASTJET is considering expanding in South Africa as the new chief executive, Nico Bezuidenhout, evaluates growth opportunities for the unprofitable discount airline and says the continent’s most industrialised economy is too big to stay out of.
While the Africa-focused carrier already connects Johannesburg with its hubs in Tanzania and Zimbabwe, it has no internal services in South Africa.
The market “cannot be ignored,” Bezuidenhout, 40, said in an interview in Johannesburg, where he’s relocating FastJet’s headquarters from London after joining the company in August.
Bezuidenhout is starting to identify growth opportunities after beginning a fleet overhaul and cutting weaker routes to reduce costs and stem losses at FastJet, which he anticipates will break even at a cash-flow level from the fourth-quarter of next year. The carrier has not made an annual profit since it was started in 2012.
The chief executive previously ran budget carrier Mango Airlines for 10 years and had spells as head of its state-owned parent SAA.
Bezuidenhout said he would like to make progress in South Africa next year, though FastJet would have to comply with regulations that capped foreign ownership of the country’s airlines at 25 percent. The company was owned by institutional shareholders and EasyGroup, the investment vehicle of EasyJet founder Stelios Haji-Ioannou, according to Bloomberg.
‘When one enters this market you have to do it carefully in a considered and measured manner.’
“Would we consider entering a joint venture agreement?” the chief executive said. “Would we consider (merger and acquisition) activity or would we consider partnering with somebody and doing a greenfield operation? I think all of those options are on the table.”
If FastJet entered South Africa it would compete with Bezuidenhout’s former employers SAA and Mango.
Other carriers in the market include FlySafair and Comair, which operates British Airways flights in the country and owns discount airline Kulula.
“The South African aviation market is reasonably overtraded,” Bezuidenhout said. “When one enters this market you have to do it carefully and in a considered and measured manner.”
FastJet is also evaluating expansion in other markets in southern Africa, though Bezuidenhout said it would resist deploying excess capacity by adding routes too quickly, saying that was “the quickest way that you drive an airline into the ground.”
The shares have slumped 78 percent this year in London, valuing the airline at £14.8 million (R264m). The stock was little changed at 15.25p on Wednesday.
The former chief executive, Edward Winter, quit in March following pressure from investor Stelios, as the entrepreneur is known.
Bezuidenhout declined to comment on the potential size of FastJet’s third share sale in two years, announced last week along with the resignation of the chairman, Colin Child. He said he was “cautiously optimistic’’ that Stelios would participate as he supported changes including a switch to Embraer E190 regional jets from larger Airbus Group A319s.
Two-thirds of the company’s A319 planes have been removed from the fleet and seat occupancy rates have risen with the first of the smaller models, FastJet said recently. The airline expects to reduce operating costs by as much as 15 percent.