FastJet to switch to smaller aircraft
AFRICAN discount airline FastJet will switch to a fleet of Embraer regional jets from larger Airbus Group planes as new chief executive Nico Bezuidenhout seeks to stem losses by better matching capacity with demand.
The fledgling carrier would also move its headquarters to Johannesburg from London to pare expenses and bring the company closer to its key markets, said Bezuidenhout, who took over as chief last month.
Fastjet will have returned three leased 145-seat Airbus A319 jets by the end of September and plans to sub-lease two, with a sixth, which it owns, up for sale. The carrier has agreed on short-term leases for three Embraer E190s with fewer than 120 seats apiece, the first of which is due in Tanzania within two weeks.
The move to Johannesburg will be made in stages following consultation with the workforce, starting with the commercial department by the end of this year. It should reduce head-office expenses by as much as 35 percent.
Based on current projections, Fastjet should break even in terms of its cash flow from the fourth quarter of next year, he said. The company, which has yet to report an annual profit and lost £16.9 million (R310.8m) last year, said in June that it remained cash flow negative, and raised £15.2m in a share sale last month to cover working capital.
The initial batch of Embraer planes will be taken on so-called wet-lease terms, including pilots, cabin crew and maintenance staff, so that they can start flying immediately. Bezuidenhout said he would probably replace them with aircraft of the same type on standard leases and manned by FastJet employees by April.
“I can get wheels on the ground now,’’ he said. “Every flight that takes off that you are only selling half the seats, you are losing money.’’
The switch from A319s should lift FastJet’s load factor from the 47 percent reported in June to above 70 percent, he said.
While that is a healthier occupancy level, the majority of the world’s low-cost airlines prefer the greater efficiencies of Airbus and Boeing jetliners. Many costs also remain fixed whatever the size of plane.Stabilisation could be achieved without additional capital, and further funds would only be sought for expansion, possibly from the end of next year, Bezuidenhout said. Growth plans will focus initially on South Africa, the continent’s largest market. – Bloomberg