FASTJET TURMOIL COSTS LENIGAS HIS CHAIRMAN OF THE BOARD POSITION
(Posted 11th June 2013)
Word from the UK has it that things on the FastJet board moved fast and furious, following a devastating report by auditors KPMG over a 56 million US Dollars loss, which called the survival of the airline into doubt just a few days ago, of course reported here at the time.
While management promptly started their counterattack on the reputable audit and financial consultancy firm, calling the losses ‘historical and out of context’ the market was not fooled over this smokescreen being put up. With delays of the startup in South Africa now running into months rather than weeks already, and three aircraft on the books for the Tanzanian operation, questions are being asked of the financial sustainability of the FastJet’s model, which, while attracting passengers in Tanzania seems to leave too little on the bottom line to turn the ship around at present. The airline is also still not operational in Kenya, a much larger domestic market and thought to have been the prime target for a FastJet launch, until they found themselves in legal battles with partner Fly 540, which prevented a startup and even prompted talks with Jetlink at the time.
The hullabaloo with erstwhile partners Fly 540, then turned into foes over claims and counterclaims of an additional nearly 7 million US Dollars of historical debts by Fly 540, which their managers claimed had to be paid by FastJet and which David Lenigas in particular claimed was entirely to be borne by Fly 540, ended up with suggestions by this correspondent that not all was well in the due diligence carried out by Lenigas’ trusted team, as apparently such crucial details were either completely overlooked or conveniently ignored. Then, as now, it was equally suggested that heads would likely roll, and when the losses piled up, and KPMG put their concerns in writing and qualified the FastJet PLC accounts, the endgame seemed to race towards those responsible for the mess. While the legal cases have all been dropped under a mutally agreed upon out of court settlement, the departure of Lenigas will no doubt bolster Don Smith’s ego, who after all now appears to have won the day and gotten rid of his erstwhile partner, who then turned business rival and finally turned enemy.
The proposed new investors in FastJet’s principal shareholders Lonrho, a group of reportedly wealthy people from Switzerland or so it appears, seemingly left no doubt over whom the felt responsible for the financial dire straits FastJet found itself in, and in – and one can only go by rumours – a major boardroom bust up David Lenigas was left with no option but to quit, having previously resigned as Chairman of Lonrho to become full time Chairman of FastJet in late 2012. In a rather interesting aside it was also found out that Lenigas, only days ago, apparently purchased another 1 million FastJet shares, probably hoping to either shore up his position on the board or else sell them to potential investors at a premium. The share price at the time was said to have been down from the all time high by some 80 percent.
While Lenigas tried to put a brave face to his departure, has CEO Ed Winter been appointed as temporary Chair, trying to save the day and convince investors that their money will be safe, a hard sell considering the devastating opinion offered by KPMG on the state of the company’s finances.
Time as always will tell where this is heading but the negative PR over FastJet has just been piling up of late and should the potential investors remember the main joke about aviation, they will be double wary to sink their money into such a venture. ‘Q: How does one get a rich man … A: By starting out as a very very very rich man and then going into aviation’. Watch this space as this saga is for sure having more twists in the tail.