FASTJET’S HALF YEAR RESULTS GIVE BOOST TO LCC CONCEPT AS AIRLINE BUYS FIRST JET
(Posted 28th September 2015)
The upwards trend of carrying more passengers month after month has now translated into a vastly improved financial performance of Fastjet PLC, the UK based and London Stock Exchange quoted company which aspires to become Africa’s continental Low Cost Airline. While suffering the fallout of depreciating currencies in Tanzania and other countries where Fastjet flies to, does this not immediately impact on the half year results but will need factoring in for the second half of the year 2015 and the projections for next year, i.e. 2016.
In fact, much of the improvements vis a vis higher passenger numbers and additional aircraft on the fleet allowing for more frequencies and new routes, did not make it into the first half results as most of these changes were effected during the early second half of the financial year.
Besides the financial updates did news also emerge that Fastjet has broken tradition – the airline has leased the current five jets on its fleet – and opted to purchase their sixth Airbus A319 outright as an estimated cost of some 15.5 million US Dollars.
Key operational and financial data obtained from Fastjet show where significant progress was made over the past 12 months:
Operational highlights
H1 2015
· fastjet Tanzania
o 51% increase in aircraft utilisation (from 6.4 to 9.7 block hours per aircraft per day)
o 56% increase in total capacity (seats flown)
· 94% punctuality – (arrival earlier than or within 15 minutes of schedule)
Financial highlights
H1 2015
· fastjet Tanzania
o First half revenues US$31.5 million (H1 2014 US$19.0 million)
o 7% increase in average revenue per passenger to US$86.61 (H1 2014 US$81.69)
o 56% increase in passengers carried to 363,769 (H1 2014 232,855)
o First half losses before tax of US$9.0 million (H1 2014 US$13.9m)
· fastjet Group
o Operating loss before exceptionals US$12.8 million (H1 2014 US$17.3 million)
o Operating loss after exceptionals US$12.8 million (H1 2014 US$19.8 million)
o Closing net cash US$70.0 million (H1 2014 US$17.9 million)
o US$75 million equity fund raise (before costs), significantly broadening the institutional shareholder base
· Share capital reorganisation – consolidation of ordinary shares on the basis of one new share of £1 each for every 100 shares of 1p each
Ed Winter, CEO of Fastjet PLC, used the opportunity of having the H1 results published according to LSE rules, to comment on the changes as follows:
‘Using the same assets as in H1 2014, three Airbus A319s, in H1 2015, through better utilisation we increased the number of seats flown by 56 per cent, total revenue increased by 66 per cent and operating losses reduced by 26%, a great achievement. Since then, in Q3 2015, we have doubled the size of the fleet to six and are well on our way to having three bases, Tanzania, Zambia and Zimbabwe fully operational by the end of the year. This expansion of the fleet and network is particularly important in laying the foundations for profitable growth in 2016. Whilst we have seen these very significant improvements, African currencies have lost considerable value against the US dollar, which combined with a worldwide reduction in commodity prices, has caused an economic downturn in both Tanzania and Zambia. In addition, the start of operations in Zambia and Zimbabwe has been delayed into Q4. Accordingly the Board has downgraded its forecast for full year 2015 but is confident of meeting its expectations for 2016’.
Meanwhile did the Chairman of the company, Mr. Clive Carver, also offer his comments when making the announcement earlier today:
‘I am pleased to introduce the results for the six months to 30 June 2015, a period in which the Company’s future was transformed by an equity fundraising of US$75 million to provide expansion working capital and funding for the acquisition of aircraft. The fundraising marked a major step towards achieving our vision of becoming the most successful pan-African low-cost airline through our strategy of operating domestic and international routes in all viable African markets. The impact of this funding, however, is not reflected in the results for the period under review during which we operated three A319 aircraft on essentially the same routes as 2014. The improvement in the financial results set out in this interim statement compared to the corresponding period in 2014 result from greater utilisation of the fleet from steadily increasing demand across the network. As a result of slower than anticipated route development and the impact of weak African currencies, in particular the Tanzanian Shilling (TZS) against the US dollar, we now expect trading in the second half of 2015 to be materially behind management’s expectations. The Board has not adjusted its forecasts for 2016’.
Operations
· Punctuality and reliability in the six-month period in review remained excellent, with 94% of flights arriving on time (earlier than or within 15 minutes of schedule) with less than 1% of flights cancelled.
· Aircraft utilisation increased over the period to reach 11.2 block hours per aircraft per day by August 2015. This is an optimum figure for the current fleet size and more aircraft are required in order to expand the network.
Growth in Tanzania – Domestic and International
· fastjet Tanzania is already by far Tanzania’s largest airline, flying over 10,500 seats a week on 76 flights from Dar es Salaam. Its nearest competitor, Precision Air, offers approximately 4,700 seats on 73 weekly flights (Source: OAG Analytics data, 5 August 2015). During H1 2015 fastjet Tanzania increased capacity from 330,050 to 518,230 seats.
· In July, fastjet Tanzania added its sixth international route to its network between Dar es Salaam and Lilongwe in Malawi.
· Flights from Dar es Salaam to Johannesburg have increased from three a week to daily, and flights from Dar es Salaam to both Lusaka and Harare also moved to a daily programme. Fastjet Tanzania operates five flights a day from Dar es Salaam to Mwanza and four flights a day to Kilimanjaro. This increase in flights will be flown by an additional Airbus 319 aircraft that was introduced into the Tanzanian fleet in September 2015.
· fastjet has continued to lobby vigorously with regards to the outstanding designation on the Bilateral Air Services Agreement (BASA) between Tanzania and Kenya. The Company is hopeful of a successful resolution before the end of the year.
Growth beyond Tanzania
· fastjet Zimbabwe – The Company expects to be granted an Air Operator Certificate (AOC) for fastjet Zimbabwe shortly, with a demonstration flight scheduled within the coming weeks being the final hurdle. Following the grant of the AOC we will apply for the Zimbabwe government to designate fastjet as a Zimbabwe airline under the Bilateral Air Services Agreement (BASA) with various destination countries. fastjet Zimbabwe’s rate of growth will depend on the speed with which these designations are achieved.
· fastjet Zambia – The AOC process in Zambia has been delayed as the Zambia Civil Aviation Authority (ZCAA) had to externally source Airbus qualified personnel to assist with the fastjet Zambia AOC application. The South African CAA has been engaged to assist the ZCAA and the granting of fastjet Zambia’s AOC and the launch of flights is now on track for late Q4 2015.
· Other fastjet airlines – Bases in Kenya, Uganda and South Africa are planned for 2016.
Fleet expansion
· During Q3 2015 the fastjet fleet has doubled from three to six aircraft increasing capacity from approximately 28,000 seats per week in January 2015 to a forecast 50,000 seat per week in December 2015.
· In August 2015, fastjet announced the signing of operating leases for a further two A319 Airbus aircraft. One of these aircraft is the launch aircraft for fastjet Zimbabwe, with commercial flights expected to start in October.
· The second new leased aircraft, the fifth in the fleet, has been added to the fastjet Tanzania operation and went into service on 1 September 2015. This aircraft has provided fastjet Tanzania the opportunity to enhance the Dar es Salaam to Johannesburg route to a daily flight operating at a prime time of day, with good connections to the fastjet Tanzania domestic network.
· As announced today, the first purchased aircraft, which will be the first in the fastjet Zambia fleet and the sixth in the fastjet group fleet, was delivered on 25th September 2015.
· Dependent on existing and new market development, and the availability of suitable aircraft, fastjet may potentially add further aircraft to the fleet before the end of 2015.
Ancillary Revenue
· fastjet Tanzania has seen a steady growth of ancillary revenue year on year up by 100% from $1.2 million in H1 2014 to $2.4 million in H1 2015. As a low cost airline, fastjet strips out many of the traditional services of a full fare carrier and excludes extras such as baggage and meals on board, giving the passenger the option to purchase them as add-ons if required. A profitable ancillary revenue stream is therefore produced as fastjet offers services and functionality to customers who require them. This more transparent form of charging was new to Tanzania when it was introduced by fastjet Tanzania and has been successfully rolled out across fastjet’s East African markets.
· In July 2014, fastjet launched the ‘choose my seat’ facility, where passengers can choose their seat for a small fee. In H1 2015, over 23,000 seats were booked in this way by approximately 6% of passengers.
· fastjet’s multiple distribution channel mix presents differing opportunities for the sale of ancillary products and services.
· Looking forward, fastjet intends to maximise sales by introducing new services and embrace opportunities available from scale and technology. Specifically fastjet plans to introduce a new internet booking engine which will facilitate the merchandising of ancillary services within the sales path. In H2 2015, fastjet will introduce a charge for holding quotes for a specific “hold my fare” period and review the possibilities of broadening the on board retail product line.
Distribution
· Due to the variable nature of sales infrastructure across East Africa, fastjet maintains a varied mix of distribution methods. In Tanzania fastjet runs its own sales shops and has web and mobile sites, the conversion statistics of which are in line with the world’s best travel websites.
· fastjet also works with a third party call centre, travel agents and various on line travel agents and consolidators including Expedia and Skyscanner. In its destination markets, fastjet web and mobile sites are growing successfully; in country there is a greater reliance on general sales agents who typically work with a variety of other airlines to distribute seats locally.
Overall several sets of good news especially the outlook for 2016, during which Fastjet is again expected to undergo rapid growth especially in the new markets the airline intends to branch out to, i.e. Zimbabwe, Zambia, Uganda and Kenya. For breaking and regular aviation news from the wider Eastern African region look no further but this space.
