Just 15 months after tapping its long-suffering investors for £50m, African budget airline Fastjet said on Tuesday that it needs to raise new funds to provide essential working capital and effect the necessary changes to its operations as the trading environment remains challenging.
Although the yield per passenger continues to improve from its low point in October 2015 passenger numbers remain lower than expected. Whilst domestic routes within Tanzania are showing signs of recovery, international services remain difficult.
Passenger numbers of 390,000 are forecast for the first half ending 30 June 2016 (2015: 363,726) but load factors have declined to 47% (2015: 70%) reflecting the increase in available capacity in the past 12 months.
As announced on 9 June 2016 Nico Bezuidenhout will be joining the Group on 1 August 2016. Although he has yet to join the Company, the Board and Nico have already identified a number of opportunities to stabilise the business and address many of the challenges we face. These include a fundamental review of our fleet, both the size and type of aircraft operated, the routes flown, the relocation of our Head Office to Africa and revenue generation initiatives.
Although the ongoing cost reduction programe and the recent reduction in routes and fleet size are yielding material benefits the Group continues to be cash flow negative. Accordingly, the Company needs to raise further finance to provide essential working capital and also to effect the necessary changes to its operations, reduce costs further and pursue revenue generating initiatives to grow the business. The Group has therefore commenced the initial phases of a fund raising exercise which it plans to complete during July 2016.
The Board believes that with a new CEO, who has a proven track record of successfully operating a low cost carrier in Africa, combined with a more pragmatic approach to operating the business, a much reduced cost base and management positioned in proximity to our markets and customers the Group has a viable and attractive future.
The company has been in dispute with easyJet founder Stelios Haji-Ioannou, who owns a 12.6%, and had expressed concerns it would run out of cash. Two of its executives left the business after Haji-Ioannou called for their dismissal.