astJet Plc is approaching potential South African investors about buying stakes to finance a route expansion in the east and south of the continent and support its effort to become the first pan-African discount airline.
“We are an African company, even though we are listed in London,” Chief Executive Officer Ed Winter said in an interview in Cape Town on Thursday. “It makes a lot of sense to have South African shareholders” for potentially “significant” investments.
FastJet, which has its corporate headquarters at London Gatwick airport, operates three leased short-haul Airbus Group NV A319 airliners from a base in the Tanzanian port city of Dar es Salaam. The Tanzania unit, which began operating in November 2012, had its first profitable trading month in December 2014. The carrier intends to set up operations in Kenya, Zambia, Zimbabwe, Uganda and South Africa in the next few years.
While FastJet’s planes are almost fully utilised, it has scaled back efforts to secure as many as 10 more aircraft by December due to delays in securing licenses, Winter said.
FastJet has been unchanged in London trading for about a week at 1.25 pence, valuing the carrier at 20.5 million pounds ($30.2 million). Even after rising this year, the stock is down 34 percent from 12 months ago.
“There is a lot of value in the foundation that we have built,” Winter said. “The share price doesn’t reflect that yet.”
The route network serves four towns in Tanzania and one city apiece in South Africa, Zambia, Zimbabwe and Uganda.
“These guys have clearly done their homework,” Linden Birns, managing director, Plane Talking, a Cape Town-based aviation advisory service, said by phone. “Demand for air transport in Africa is growing at around 5 percent per annum. The challenge they face is a regulatory one.”
Opening up the aviation market across 12 African nations — Algeria, Angola, Egypt, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Senegal, South Africa, Tunisia and Uganda — could create 155,000 jobs and boost their collective economies by $1.3 billion a year, a study released last year by the International Air Transport Association showed.
FastJet is “well on the way” to obtaining an air operator’s permit in Zambia, after a delay stemming from presidential elections in January, Winter said. There’s scope to operate domestic flights linking the capital, Lusaka, with the town of Ndola in the north and Livingstone in the south, as well as services to South Africa, Malawi, Zimbabwe and Kenya.
FastJet has also applied for operating permits in Zimbabwe, and is looking to introduce flights linking the capital, Harare, with Johannesburg.
“Things take a bit longer than you expect,” Winter said. “I’d like to make things more efficient here and move forward but it’s the way it is. We are still absolutely confident that the market opportunity is here, the model is working and opportunity to expand is here.”
While the carrier registered a business in Kenya in January 2013, it has made “little progress” in securing operating permits and hopes the snag will be resolved soon, Winter said. The carrier pulled out of Ghana and Angola in December, and has no immediate plans to reenter those markets.
“Angola is just an impossible place to do business,” while in Ghana, the currency has dropped against the dollar this year, Ebola is present in nearby countries and the nation has “major infrastructure problems,” Winter said.
