Fastjet navigates tough African terrain

Africa is often described as aviation's final frontier. Fierce protectionism, bureaucracy and a lack of infrastructure have held back what otherwise might seem the natural mode of transport for a continent crossed with jungle, mountain and desert and poorly served by road and rail.

Now with Africa's growing economies swelling the ranks of those with money to fly, tiny Aim-listed Fastjet has taken on the immense challenge of cracking the largely untapped market for affordable travel.

It has declared its ambition to become the first pan-African low-cost carrier, hoping to use its Tanzanian base as a springboard in much the same way that UK-based easyJet spread across Europe in the 1990s, when it exploited the opportunity offered by the newly liberalised single market. Fastjet has even had a hand from Sir Stelios Haji-Ioannou, easyJet's founder, who holds 5 per cent of its shares.

However, the carrier was dealt a blow last Friday when instead of marking a milestone towards its goal, it was forced to pull its maiden international flight, from Dar es Salaam to Johannesburg.

Fastjet has faced its greatest opposition in South Africa, where domestic airlines have closed ranks to object to the regulator about Fastjet's attempt to enter the market.

Chief executive Ed Winter, a former pilot who held senior roles at easyJet and Go, says that being returned previously approved paperwork just hours before departure was frustrating. "Who's to benefit?" he asks. "I'll leave you to put two and two together."

The episode was just the latest obstacle Fastjet has encountered since it began operating in November.

To penetrate Africa the plan was to negotiate permissions to fly country by country. But talks failed to yield results fast enough and Fastjet's statements have often not become reality. Analysts say that it has tried to do too much too soon, spreading itself too thinly in doing so.

Mr Winter concedes they were too optimistic. "It's actually been a lot tougher than I ever expected," he says. "There's always a curve ball coming around the corner you weren't expecting. But I think now we understand the issues."

For investors too, progress has not happened fast enough. Fastjet's shares have declined 85 per cent over the past year, cutting its market capitalisation to £22m.

Its results for the six months to June 30 contained a pre-tax loss of $42m, although Mr Winter stresses that Tanzania is stabilising, with losses before interest and tax down 54 per cent quarter-on-quarter to $4.2m.

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To win the international routes it needs to survive, Fastjet has turned to forming local partnerships in each country, taking minority equity stakes. However, it has faced particular criticism over a choice of partner in South Africa: Edward Zuma, the president's son.

With its joint ventures yet to take off, it has funded itself by issuing more shares and by drawing equity from Darwin Strategic, of which Mr Winter says there is about £8m available. Other fundraising is on the agenda.

But challenges remain. "Costs in Africa are not low," said Lars Welinder, of the consultancy Mango Aviation Services. "The usual ways in which European low-cost carriers can cut or even eliminate costs are not available to African airlines."

Fastjet would also benefit from projecting a more African image, Mr Winter admits, rather than being seen as a European airline coming to take over Africa.

However, analysts believe Africa is ready for an airline with the ambition of Fastjet, providing it has the time and cash to navigate its complexities.

Nick Fadugba, chief executive of African Aviation Services, a consultancy, said: "As the industry moves forward I think this concept of a commonly branded airline is a brilliant idea."

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