FastJet to Cut Routes as Cash Shrinks, Sending Stock Fallingby
African discount carrier says 2016 profit to miss estimates
CEO Winter under pressure to go from shareholder Stelios
FastJet Plc will start closing routes after burning through cash in its efforts to become the first pan-African discount airline, predicting 2016 earnings will fall “materially” below analyst estimates. The share price almost halved in the biggest decline since the company was founded in 2012.
The impact of challenging market conditions and currency fluctuations has proved “a lot more prolonged” than forecast in December, London-based FastJet said Monday in a statement. It plans to respond by paring capacity and making unspecified network cuts to better match demand.
FastJet Chief Executive Officer Ed Winter has said he’s seeking a successor amid pressure to leave from shareholder Stelios Haji-Ioannou as the cash situation worsens. While the company said it can meet operational needs, with $20 million available at the end of February, the board may consider raising further funds this year to provide “additional headroom.”
Shares of FastJet fell 30.75 pence, or 46 percent, to 36.50 pence, the most since the company was founded in a reverse takeover involving miner Lonrho’s Fly540 airline arm, before trading 35 percent lower at 11:49 a.m.
Analysts had been anticipating a pretax profit of $1 million this year following a loss of $35 million in 2015, for which FastJet has yet to report figures, based on the average of two estimates.
Stelios, the EasyJet Plc founder who goes by his first name and owns 13 percent of FastJet, said in an e-mail that the African carrier is suffering from “a bloated cost base created by Ed Winter and his staff.” The entrepreneur said the CEO should now go and leave Chairman Colin Child, who joined in October and was previously finance director of De La Rue Plc, to begin making cuts.
Stelios said he is still waiting to hear about a shareholder meeting he requested last week with the aim of ousting Winter from FastJet, which he says has consumed 80 million pounds ($114 million) in three years, leaving six months of cash left. He says the carrier’s base should move from London Gatwick to Dar es Salaam in Tanzania, its main operating hub, as a first step.
FastJet, which uses six Airbus Group SE A319 planes, was founded with the ambition of becoming the first discount airline spanning sub-Saharan Africa, betting that improving economies, a growing middle class and bookings via mobile devices would let it survive where the industry has always lost money.