FASTJET IN REPORTED 56 MILLION US DOLLAR LOSS
Disquieting news are making the rounds in East Africa’s aviation observer circles, that FastJet has reportedly suffered a massive 56 million US Dollar loss for their financial year, wiping out much of the share and venture capital sunk into the ‘fly cheap dream turned nightmare’ for the shareholders.
While fat cat management continues to earn huge wages, they are thought to be largely responsible for some of the major loss making factors, such as a bungled due diligence with Fly 540 which ended the two companies in a costly court battle, costly in terms of not just legal fees but the various delays then suffered to get into the more lucrative Kenyan market. Mistakes were also made in Tanzania, the only country where the company is presently flying, when shortly after launching two additional routes the plug was pulled from flights between JRO and ZNZ and JRO and MWZ. While no imminent departures of senior personnel have been reported at this stage, it is entirely plausible that the board of the company will take action against those thought primarily responsible for the financial losses, which should they continue into another year, may well spell even deeper trouble for the investments made so far.
The launch of flight operations in South Africa has also been pushed back to at least mid 2013, reportedly to allow the airline ‘to get ready’ though the aviation grapevine from further down south equally, like in East Africa, suggests a range of other issues being responsible for the postponement of the startup. LCC’s in South Africa like Kulula and Mango, among others, have meanwhile put up their own defenses against the upstart and are ready to counteract whatever FastJet may throw at the market.
Yet, if anything to go by, the losses reportedly incurred in year one of operations in Tanzania, do not seem to deter current management from continuing their strategy which a regular aviation observer from Dar es Salaam described as ‘reckless in terms of pricing, reckless in terms of how they promote by not stating the full cost of the ticket and, if the news about the 50+ million US Dollar losses is anything to go by, reckless in financial terms too’.
Ouch comes to mind as the bean counters at FastJet are now scratching their heads of how to best plug the holes these losses made in the balance sheets. Watch this space for more twists in the tail of this saga.