Is the air getting thin up there for FastJet?


Already embroiled in a potentially major lawsuit with erstwhile buddies Fly540 in Kenya, where some nearly 7 million US Dollars are at stake over alleged outstanding payments claimed by one but strenuously denied by the other, FastJet is now faced with yet more such woes in the only country they are presently operating in, Tanzania. As reported here at the time, Fly 540 Tanzania ceased operations late last year to make way for FastJet to introduce Airbus A319 equipment and then relaunch operations ahead of the busy end of year holiday travel season, flying between Dar es Salaam, Kilimanjaro and Mwanza.

Information is now emerging from Tanzania that claims are being pursued by TCAA and others, including the Tanzania Revenue Authority, from business transactions still undertaken by Fly 540 Tanzania, before FastJet came on to the scene, but with Fly540 for all purposes gone from Tanzania, authorities are now ready to pounce on what they consider the legal successor of that company.

As was the case with the multi million US Dollar claims in Kenya now laid on FastJet’s doorsteps by Fly 540 Kenya, here too the upstart’s managers are at pains to explain the precise reasons for the sudden dispute away, waiving what they consider the foundation document for rejecting any and all such claims into the faces of all and sundry. That document, a transaction paper reportedly dated 24th July 2012, allegedly confirms that only debts specifically listed in an annex to the document would be ‘inherited’ by FastJet and that all other, unlisted existing and old debts, would remain the burden of the Fly540 company and its owners.

FastJet, in the case of Tanzania, is also using this document in their defense vis a vis claims now made against them of historical debts by Fly 540 Tanzania, but also appears to be faced with demands for payment of more recently incurred obligations, since they started operations.

Said a regular aviation source and commenter from Nairobi when discussing the issue yesterday: ‘Let’s face it, Stelios’ boys messed up. The failure of FastJet to commence operations in Kenya first is from what the grapevine says entirely due to their dispute with Fly540. This is the lucrative market they wanted, not Tanzania. That was a second or third choice but in the end they had no option. Aircraft were purchased, crews recruited and they had to start earning revenue. The reports two weeks ago that they entered an MoU with Jetlink also shows that they are now desperate to get into the Kenyan market by almost any means and make use of their aircraft. Those are by any standard totally underutilized, and knowing what hours each aircraft flies for EasyJet, Stelios’ initial company in Europe, they must be bleeding from that. They completely failed to understand the nature of their proposed partners in Kenya and how those are doing business. For us it was simply a matter of time before something would blow up in their faces. And to be honest, when all is said and done, Stelios and his co-financiers of this venture, will probably take a hard look into those responsible for this mess and part company. A few people were probably quite negligent in protecting the interest of Stelios and Co and I guess there will be hell to pay’.

Added information from Tanzania also points to the direction that the spreading public knowledge about such lawsuits is not having a positive effect on FastJet’s reputation and operations in Tanzania, where the market is – apart from the strong following Precision Air has built over the years – rather jittery, considering the repeated in the air / on the ground scenarios by Air Tanzania, which has time and again let travelers down when they halted operations due to lack of aircraft or when at one time they had their AOC withdrawn by TCAA over regulatory documentation issues.

The moment an airline gets into the news over money owed, even if those are only allegations and subject surely to a full legal process to establish who owes whom how much, it is not good PR. Some people tried to smear Precision just before they were about to launch their IPO and it had to be postponed. That winding up petition then was frivolous of course and eventually dismissed, but it caused them a delay in launching the IPO and that cost them dearly. So if a new company, with other issues as we all know over the way they advertised a cheap 20 Dollar fare but which costs the traveler a whole lot more before he actually steps on the aircraft when fees and baggage charges are added, gets into the news like this, it is not good news. It can cause a rift between the market and them, can cause a rift between expatriate management and local staff when these questions are not answered completely and in a way it makes sense and it can cause a rift between management and owners. Meanwhile is Precision adding more places in Tanzania to fly to, giving the market the confidence that they are the dominant aviation force in Tanzania, highlighting their advantages instead of bothering with the problems of Air Tanzania or FastJet. This will be interesting because TCAA has the powers to sanction airlines if they do not settle debts promptly and even if it goes to court, the damage is done’ said another aviation source based in Dar es Salaam when requested to comment, albeit under the veil of anonymity.

Time surely will tell a fuller story on this latest twist in the tail of a long running saga, and for once it would be a positive development if FastJet could this time round opt for full disclosure and answer all pending questions, those asked here and surely in many other places too, instead of firing off angry communications to editors, attempting to silence inconvenient critics and aviation pundits.

So what are the passenger numbers since the launch, the load factors on flights on a week by week basis, are any current dues since operation start overdue to Tanzanian authorities, how does the airline intend to tackle what they call legacy debt issues and is there really growing disenchantment between owners and management over these emerging, but for informed observers not entirely unexpected problems with their local partners. Watch this space for answers, if any, and for breaking and regular aviation news from the Eastern African region.