*The Aim-listed airline has been hit by currency turmoil and looming elections in Tanzania
By Ben Martin
The looming election in Tanzania and currency market turmoil have sparked turbulence for Fastjet, the airline that aspires to become the first discount pan-African carrier.
The Aim-listed airline, which is based in Tanzania and launched in 2012, has warned investors to brace for “a material increase” in the annual loss it expects to post this year after the Tanzanian shilling and Zambia’s kwacha plunged against the US dollar – the currency in which Fastjet reports its results. Those sharp currency depreciations, as well as the commodity market rout, have hit the Zambian and Tanzanian economies, and Fastjet now expects trading in the second-half of the year to fall short of forecasts.
Government budget cuts in the face of next month’s fiercely-contested general election have added to the airline’s difficulties in Tanzania. Given that “quite a large percentage of the population are employed by the government”, the cuts have knocked wider confidence and spending, Ed Winter, Fastjet’s chief executive said.
He declined to estimate the extent of Fastjet’s full-year losses, and the airline’s expectations for 2016 remain unchanged. However, Liberum, which is Fastjet’s broker, increased its forecast for adjusted pre-tax losses this year to $31.1m from an earlier estimate of $19.5m, and investors sent shares in the carrier down 5.8pc to 84¾p.
In a further blow, the airline revealed that its plans to open bases in Zimbabwe and Zambia have been hampered by regulatory delays. Although both are still expected to become operational by the end of the year, the delays mean that Fastjet’s 2015 results will be encumbered by the bases’ start-up costs without receiving a boost from the income they are expected to generate.
Fastjet warned of tougher conditions during the second-half of the year as it posted results for the first, which showed a jump in revenues to $31.5m from $19m a year earlier, boosted by a 56pc leap in passengers carried to almost 364,000. Losses before tax narrowed to $9.9m from $20m in 2014.
Mr Winter wants Fastjet, which was co-founded by easyJet entrepreneur Sir Stelios Haji-Ioannou, to expand across Africa. The group is eyeing bases in Kenya, Uganda and South Africa next year and it raised £50m from investors in April to help fund those ambitious plans.
Sir Stelio’s easyGroup can appoint two board members under a brand licence with Fastjet and the airline said today that the co-founder had exercised that right by naming City veteran Tim Ingram as a non-executive. The entrepreneur still has the option to make a second appointment.
“Because we’ve entered a different phase of our growth, we’ve had a big fund-raise, we’re now expanding quite rapidly, I think Stelios feels he perhaps wants to take a little bit more interest in what we’re doing,” Mr Winter said of Mr Ingram’s appointment.
Growing its fleet is a major focus for the airline. During the first-half of the year, Fastjet was flying with three leased aircraft.
However, the carrier has since struck deals to boost its fleet to six planes, including sealing an agreement last month to buy its first jet. Mr Winter said the airline was currently in negotiations about making its second purchase.