Fastjet's losses deepen despite LCC stabilisation plan

Fast Jet A 319: With many of the A319 leases due by September 2016, Nico Bezuidenhout recommended that the airline switch to using Embraer E190s by the start of October 2016.

African low cost carrier Fastjet has seen losses almost double in what CEO Nico Bezuidenhout described as a “a challenging year”

Bezuidenhout has been leading a restructuring following a disastrous period of rapid expansion – that restructuring is still underway the company said as it announced the financial results today.

The airline has a four point plan to make the turnaround:

Major cost reductions
Fleet transition to smaller aircraft
Head office relocation to Johannesburg
Revenue initiatives including route rationalization

In its full-year results for 2016, it said losses before tax soared from $21.6m to $47.9m, as costs increased by 29% caused by increased capacity and start-up losses on new routes.

Bezuidenhout said: “2016 was a challenging year and these financial results reflect not only a difficult market place but also the overly optimistic expansion plan adopted in early 2015.

“Since I became CEO on 1 August 2016 we have successfully initiated a Stabilization Plan to address the immediate challenges. However, although good progress has been made many of the Plan’s benefits to reduce our cost base, and match capacity with demand, have naturally taken time to feed through and as such will only be materially realized in 2017.

Nevertheless, the effects of the Stabilization Plan in the second half of 2016 saw Fastjet withdraw from a number of loss-making routes and remove surplus capacity such that while between July and December, capacity was reduced by 25%, passenger numbers were only down by 3% and revenues rose by 5%.

“The final stages of the Stabilization Plan are now implemented and the strong progress we have made means that Fastjet’s cost base will be significantly reduced by the third quarter of 2017 and that we are well on the way to fulfilling our baseline aim of achieving a cash flow break even position by the fourth quarter of 2017.

Since the year-end, Fastjet has completed a US$28.8m fundraising, entered into a strategic and operational partnership with Solenta and significantly strengthened our Board. With these initiatives building on the benefits of the Stabilization Plan.

Although a number of challenges remain, Fastjet is now close to being sufficiently stable and well positioned to be able to consider disciplined growth opportunities in our target African markets.”

Source: http://www.africanaerospace.aero/fastjet-s-losses-deepen-as-lcc-continues-stabilisation-plan.html