FastJet Annual Loss Widens on Costs From African Route Expansion
FastJet Plc (FJET) said its operating loss widened in the first full year of flying after the discount carrier took steps to expand from Tanzania into South Africa, Zambia and Zimbabwe in a bid to build a pan-African carrier.
Losses reached $47.6 million, or $79.1 million including charges for restructuring forerunner Fly 540, while sales more than doubled to $53.4 million, London-based FastJet said today.
FastJet said in April it would raise 15 million pounds ($25 million) from share sales to fund growth, with EasyJet Plc (EZJ) founder Stelios Haji-Ioannou injecting cash to get 10 percent of the business. Capacity reached 60,000 seats in May, up 11 percent from a year earlier, though yields are under pressure from price cuts at Air Tanzania and Precision Air Services Ltd.
“Although the yield is at a level which could provide a profitable operation, resources are not being utilized fully,” Chief Executive Officer Ed Winter said in today’s statement. “Higher frequencies and more international routes are being progressively introduced to increase aircraft utilization.”
FastJet had an average load factor of 72 percent for the year, meaning its planes flew almost three-quarters full. Some 95 percent of planes are operated to schedule, an unusual display of reliability in Africa, where flights can commonly be hours late or be scrapped altogether at the last minute.
Fly 540 Wind-Down
That’s allowed the carrier to apply a standard revenue-management system for low-cost carriers, with early bookers paying $20 plus tax one way and customers buying tickets on the day charged more than $200, according to Winter.
Yield per passenger -- a measure of prices -- rose from $47 in January to $97 by the end of the year, with 38 percent of customers being first-time flyers in the initial five months.
Most of Fly 540, around which the carrier was built, has been closed down after contributing the bulk of overall losses, with a Kenyan operation disposed of yesterday after FastJet concluded that it couldn’t be adapted to its low-cost model. Fly 540 operations in Ghana and Angola have been suspended.
By 2014 FastJet aims to carry 6 million passengers on 24 aircraft, with more flights on domestic services in Tanzania together with new routes to Kenya, Malawi and Uganda and possible bases in Kenya, South African and Zambia. The fleet currently features only Airbus Group NV (AIR) A319 short-haul planes.
The company also aims to increase its reach using franchising, expanding the network at last risk.
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