As the flood of unsolicited offensive and threatening mails and foulmouthed comments on my blog site continue to flow in, attributed by a few misguided individuals who clearly have their own agenda or speak for their masters on either side of the aisle, it is always refreshing to see the opinions about FastJet from other aviation journalists and observers. I take the liberty to re-publish an article from the Telegraph of 05th March, shedding some more light on the thunderous row which has broken out in the skies above us and the boardrooms of the two main protagonists. Enjoy the read!
Fastjet braced for turbulence
Nobody would pretend that starting an airline in Africa is easy. But when FastJet took off last June, few were braced for quite so much turbulence from within the company.
Since its launch, FastJet’s regular announcements largely give the impression of a smooth flight. But below the surface a huge row is going on.
7:30PM GMT 03 Mar 2013
The idea was to bring low-fare air travel to sub-Saharan Africa, starting with Kenya, Tanzania, Angola and Ghana. It was, wrote Liberum Capital analyst Peter Hyde, the “final frontier” for low-cost carriers and a market of “huge potential”.
There was no obvious quibbling with the management team either. FastJet’s chief executive, Ed Winter, is a former chief operating officer of easyJet. Meanwhile, the man responsible for founding that airline, Sir Stelios Haji-Ioannou, was aboard for the ride, taking a €50,000 (£43,080) consultancy fee and a 5pc stake in return for licensing his FastJet brand.
Since its launch, FastJet’s regular announcements largely give the impression of a smooth flight. But below the surface a huge row is going on. It has pitted the founder of its Kenyan wing, Don Smith, against FastJet’s combative chairman, David Lenigas. The bust-up helps explain why most of the unofficial newsflow lately has concerned disputes over alleged unpaid aircraft leasing charges, landing fees, bank debts and tax.
To understand what’s going on, you have to go back to the £55m all-share deal last June that saw Lonhro’s aviation wing, Fly540, reverse into the Aim-listed Rubicon Diversified Investments. The new company was renamed FastJet. Today, it flies three Airbus A319s in Tanzania under the FastJet brand and seven planes in Ghana, Angola and Kenya under the Fly540 livery.
Part of the deal involved buying out Mr Smith, the owner of 51pc of Five Forty Aviation, the company that alongside Lonrho owned the Kenyan operation – Fly540 Kenya. Mr Smith agreed to sell his controlling stake for $2.25m (£1.5m) cash and a further $1m in shares.
- Fastjet faces having planes repossessed
04 Feb 2013
- Threat to FastJet’s Fly540 brand as row escalates
05 Feb 2013
- FastJet faces $7m legal claim over African debts
27 Jan 2013
- Fastjet launches in Africa
27 Nov 2012
But emails seen by The Daily Telegraph show that within weeks he was complaining that the deal had not been done. Mr Smith alleged two main things. First that he had not been paid. And, second, that Mr Lenigas reneged on a deal to clear almost $7m of inter-company debts at Kenya’s Chase bank. The loans had been guaranteed by Five Forty Aviation, including $2.1m by Mr Smith personally.
Last July, Mr Smith wrote to Mr Lenigas, saying: “I have not received my shares in Rubicon. The deal was always based on Lonhro/Rubicon clearing the bank debt … You have not paid the $2.1m you pledged to pay Chase. No proposal has been made to Chase on repayment of the rest of the debt. Mate, I am not being difficult but [as] far as I’m concerned the deal is still not done yet.”
Mr Lenigas emailed fellow directors later that month, saying “I don’t fully understand the Don/Chase situation”. But Mr Smith reminded him of a letter Mr Lenigas himself had signed in May. It had been sent to Chase bank on a Rubicon letterhead and stated: “We confirm that immediately upon the completion of the acquisition of the company [Five Forty Aviation] by ourselves we will pay, in settlement of those obligations due to Mr Smith and/or his associated companies… being $2.1m”. When Mr Smith raised that, Mr Lenigas emailed back: “If that letter comes out, I will have to resign immediately.”
Asked what he had meant, Mr Lenigas maintains it was just his way of bringing Mr Smith to the table, adding: “I was playing a game with him.” He also insists the board was aware of the letter to Chase that he had signed, saying: “The board knew about it, absolutely.” Moreover, Mr Lenigas says that just days after last July’s email exchange Mr Smith was paid more than $2m cash, while his shares are held in escrow.
None of this tallies with Mr Smith’s version of events. The $2m, he claims, was payment for the business not to clear the debt. By November, he had written to Mr Winter claiming that “Tanzania owes 540 Kenya significant monies” and that since FastJet took over the Angola and Ghana operations “these countries’ losses have increased not decreased”. Mr Winter replied, complaining: “The ownership and control issue seems to inhibit any sensible dialogue.”
In January this year, Mr Smith emailed Mr Lenigas. “Chase have no interest in working with you guys,” he wrote. “They don’t trust you.” In an email headed “Bloody Urgent!!!!!”, Mr Lenigas dismissed that as “crap”, before adding: “You got your money. I have lost a shit load of cash.” Mr Smith replied: “Mate I think you need to take a chill pill.”
Since then, the temperature has only risen. By the end of January, Mr Smith’s Five Forty Aviation launched a legal action against FastJet, claiming $6.78m. He then threatened to remove the Fly540 brand from FastJet’s Angola, Ghana and Tanzanian operations. Meanwhile, FastJet found itself being warned by Canada-based Avmax Aircraft Leasing that it was repossessing aircraft, while the Tanzania Airports Authority claimed Fly540 Tanzania owed it $95,360. Fastjet has since raised £3.5m at 2.25p – a hefty discount to the share price.
A FastJet spokesman says: “Issues with Don Smith are being resolved through the proper channels. All relevant documents have been provided to our lawyers.”
The spokesman adds: “We are pleased with FastJet’s success to date. Fastjet has now flown over 75,000 passengers. It has also had more than 40,000 likes on Facebook – more than any other East African airline.”
But a spokesman for Five Forty Aviation insists: “Don has still not received the shares owed to him, nor has the outstanding debt owed to Chase bank been paid.”
Seatbelts should remain fastened on this FastJet flight.