Has the air ran out for FastJet?

HAS THE AIR RAN OUT FOR FASTJET?

The news for upstart FastJet are just getting grimmer by the day, as erstwhile partner now turned foe Fly 540 is reportedly stepping up efforts to extract by hook or crook nearly 7 million US Dollars from the FastJet owners, something they however strenuously and continuously deny ever owing.

The latest twist in the tail, informed about by a periodic UK aviation contact, talks of Fly 540 terminating the license agreement to use the name of Fly 540 in all African destinations other than Tanzania, where FastJet had acquired 90 percent of Fly 540 Tanzania according to records published.

This, if correct, would seriously impeded FastJet, for the time being at least until another partner has been found and agreements negotiated – like with Jetlink in Kenya – to roll out the commencement of flights, with the Fly 540 owners now clearly playing on time and being the proverbial spoilers.

The Herald Online has today published the following details on the alleged termination of the license agreement between Fly 540 and FastJet, reproduced here with author’s and publisher’s credit:

Five Forty Aviation Withdraws Licences from FastJet

Licences withdrawn from operations in Angola, Ghana and Tanzania for failure to comply with agreements

NAIROBI, KENYA — Five Forty Aviation Limited (“Five Forty Aviation” or “the Company”) announces that it has withdrawn the licences it had granted to Lonhro Aviation (BVI) Ltd operations in Angola, Ghana and Tanzania (“FastJet’s Africa Operations”) to use the Fly540 brand with immediate effect. This is due to the failure on the part of FastJet’s Africa Operations to comply with the respective licence agreements signed with the Company.

In June 2012, FastJet (formerly known as Rubicon Diversified Investments plc) acquired Lonrho Aviation (BVI) Ltd (“Lonrho Aviation”) thereby gaining control of the assets and liabilities of Lonrho Aviation’s three subsidiaries: Fly 540 Angola – Sociedade de Aviação Civil SARL (“Fly540 Angola”), 540 Ghana Limited (“Fly540 Ghana”) and Fly540 (T) Limited (“Fly540 Tanzania”). FastJet’s Africa Operations have been licensing the Fly540 brand from Five Forty Aviation since 2008. FastJet flies three Fly540-branded planes in Angola and two in Ghana. It flew two planes using the Fly540 brand in Tanzania until November 2012.

On 24 January 2013, lawyers representing Five Forty Aviation Limited wrote to Fly540 Angola, Fly540 Ghana and Fly540 Tanzania respectively to inform them that if they did not demonstrate compliance with the terms and conditions of the licence agreement within seven days, the Company’s lawyers would withdraw their ability to use the Fly540 brand.

Specifically, the conditions that are not being adhered to are as follows:

1. Payment of outstanding licence and other fees of US$6.9m, US$0.5m and US$0.3m for Fly540 Tanzania, Fly540 Angola and Fly540 Ghana respectively as well as failure to disclose financial information for December 2012

2. Contrary to the licence agreement and despite several reminders, FastJet’s Africa Operations have not provided information to the Company’s Head of Safety to demonstrate compliance with Five Forty Aviation’s accepted safety systems

3. Failure to provide the Company’s Quality Manager with reports demonstrating that the quality systems are in operation

As FastJet’s Africa Operations have failed to respond, notice has been given to Fly540 Angola and Fly540 Ghana to re-paint their aircrafts in a neutral colour. Additionally, FastJet’s Africa Operations have to re-brand all of the sales offices, removing the Fly540 brand; return all materials containing the Fly540 logo; and rename the companies other than 540. Also, as per the licence agreement, the Company has written to the Civil Aviation Authority in all three countries informing them of the withdrawal of the licences.

Don Smith, CEO of Five Forty Aviation, said: “We had no choice but to take this action because the most worrying aspect of non-compliance with the licensing agreement is that we have no way of assuring that the planes are safe to fly. We have not received any safety reports for the past three months from FastJet’s Africa Operations and we believe that one plane, which flew with defects from Tanzania and landed in Nairobi on 14 December, should not have flown.”

FastJet now finds itself in the unenviable situation to lack access to licenses in the countries in question, after being literally ambushed by a party they could not speak highly enough about some months ago and who have now turned into the proverbial bogeyman for them, not that key individuals had not been made aware of the sentiments the aviation industry had about the choices they made.

While there is a level of glee from key aviation pundits and observers in the region, into whom FastJet laid heavily in the past for speaking up about the misleading nature of their initial public statements of fares of 20 US Dollars without telling the public at the time of the significant extra add on charges for a variety of services and taxes, there is also some regret that a potentially major investor into the aviation sector in East Africa is now being torn to shreds by sharp business practices. Irrespective of the faults of individual senior staff at FastJet, who failed to cultivate a working relationship with the media, other than a select few courted almost nonstop, their mistakes in this area and apparently also in the field of due diligence covering ALL aspects of their contractual relationship with Fly 540 are now backfiring and seriously endangering the corporate well being of the company. Article republished here in recent days about the call by the lessors to de-register the Airbus A 319 aircraft, have also rocked the market to quite an extent, with rumours flying high and low, something which has in the past for others led to an almost instant drop of bookings, as was seen with some ill fated regional upstarts like Victoria Airlines International or East African Airlines, both from Uganda, where market concerns in the end made all the difference about staying in the air with passengers or staying on the ground without sufficient numbers.

As this game keeps heating up, be sure to watch this space to stay updated when the next revelations become known.