Fastjet in another big loss

Dar es Salaam. Fastjet lost some $81 million (about Sh130 billion) last year. Analysts say this might put a dent in the low-cost carrier’s ambition to become the most successful airline of its kind in Africa.Last year’s loss adds up to $131 million (about Sh210 billion) in just two years,

 

with its profit books failing to balance by a whopping $50 million in 2012.Had it not been for the Tanzania operation the company’s financial position would have been more difficult, according to aviation experts. They attribute the firm’s troubles to factors such as unhealthy competition, regulation snags and regional market size limitations.Regardless of the latest hitch, the company remains upbeat about making it big time in Africa as it seeks a foothold in the volatile global travel trade. 

“Whilst the group has incurred losses during the year, the directors are confident that the group has access to sufficient finance to operate as a going concern for the foreseeable future and, in any event, for a period of at least one year from the date of approval of these financial statements,” notes the Annual Report and Financial Statements for the Year ended December 31, 2013.The business phrase “going concern” is a term for a company that has the resources needed to continue to operate indefinitely.

 If a company is not a going concern, it is bankrupt.Originally trading as Rubicon Diversified Investments Plc, the group adopted a new investing policy in November 2011 targeting the global aviation services sector with a focus on Africa. The company listed on the London Stock Exchange was renamed Fastjet Plc on August 6, 2012--three months before it launched its first flight.Except for Tanzania, its home base, the firm’s other businesses in Africa have been adisappointment and a major source of financial setbacks.

 It has also done business in Kenya, Angola and Ghana.The FastJet Tanzania commercial manager, Ms Jean Uku, said last year’s loss included “exceptional items worth $32 million which were write-downs in the value of Fly540” in Kenya. She told The Citizen on Sunday that the group’s operating loss was $47 million, $22 million of it in the country.“The total operating losses attributable to Fastjet in Tanzania were $27 million,” Ms Uku added. “We expect the Tanzania operation to be profitable by the end of 2014.

” To fix the financial hitches, Fastjet is reportedly expanding its network and working its resources harder in an attempt to cover head costs. The new routes--Johannesburg and Lusaka--are doing well and are set for more frequency as the LCC gears up to launch the Harare route with two flights next month.Plans are also underway to increase frequencies on the domestic Mwanza route to four flights a day on Sundays, Mondays, Fridays and Saturdays.According to the audit report, capacity has risen over the past months, with total seats flown in May rising to 60,320 from 54,230 in April--an increase of 11 per cent. Year on year, the seats increased by 68 per cent and revenue went up by 81 per cent compared to May 2013.“Tanzania, Kenya, South Africa and Zambia have been identified as major growth opportunities,” says the KPMG UK report. 

“There are approximately 160 million people in the region currently with only 0.21 air seats per head of population per annum.”By 2018, Fastjet expects to operate 24 aircraft and carry six million passengers, representing a 13 per cent market share of estimated pan African passengers in these markets.According to Dar es Salaam Consultant Manzi Rwegasira, the potential for air travel in Africa is relatively high compared to other continents. 

This is largely due to poor surface transport infrastructure, long distances between cities and the fact that major cities are at high elevation in most African markets. “The Tanzanian market will grow along with the rest of the continent,” he told The Citizen on Sunday. “However, airlines will need to adjust their business and operating models to suit the Tanzanian market.”This week, another major operator in the domestic market announced its performance results for last year which showed a reduction in its losses. The Precision Air Group narrowed its annual net loss by 60 per cent during the year ending March 2014 as it moves closer to profitability.

The company listed on the Dar es Salaam Stock Exchange (DSE) recorded a net loss of Sh12.1 billion in the year ending March 2014, a massive leap from the Sh30.1 billion recorded during the year ending March 2013. This was mainly because the company had not fully implemented its turnaround strategy at the time the just-released financial statement was prepared.In the first half of 2013, Fastjet reported a $42 million net loss but its directors were upbeat about the fledgling African 

LCC’s prospects, with its Tanzanian domestic operations exceeding expectations.

The fact that 38 per cent of the passengers during the period were first time flyers, they said, was enough proof that the LCC model was working. According to the carrier, it would be performing much better had the promise to liberalise the aviation market in various parts of Africa been honoured.“Fastjet has stimulated the market, bringing air travel to hundreds of thousands of people who previously could travel only on long and arduous road journeys,” Ms Uku says. According to her, the LCC “has changed the face of Tanzanian aviation by bringing great value fares and reliability”.“Tanzanian customers will now expect other airlines to match that performance,” she added.from:the citizen