The Air is indeed getting thin up there

THE AIR IS INDEED GETTING THIN UP THERE

Predictably were the outcries from those named angry but for certain in denial, after the latest article was published on the ups and downs and twists in the tail of the FastJet versus Fly540 saga in Kenya and Tanzania.

As done before, it is always interesting to read what others write on this subject too, and a juicy morsel was sent to this correspondent a short while ago of an article by the Daily Telegraph in the UK, which, if true, could spell serious problems for FastJet in Tanzania, no matter under what name they trade, are registered or are doing business under.

Fastjet faces having planes repossessed

Daily Telegraph

Canada-based Avmax Aircraft Leasing has written to FastJet saying it was removing the registration of three planes leased by its Tanzanian operation. The trio of aircraft, flying under the Fly540 brand, have allegedly run up unpaid leasing and maintenance bills of almost $2m (£1.3m).

The letter from Avmax vice-president Don Parkin, headed "Notice of De-Registration", notified "Fly540/Fastjet of its continuing default" under the lease terms. It added: "As such, the lessor has elected to deregister the aircraft from the Tanzanian Civil Aviation Registry." The January letter said the deregistration would "be commenced immediately".

Mr Parkin’s letter followed a warning in November that Fly540/FastJet was in default and continuing "to refuse and neglect your financial obligations". Avmax claimed the airline had undertaken to pay $150,000 per month for the rental and maintenance of the planes.

Last week’s letter was sent to FastJet’s chief financial officer Angus Saunders and Don Smith, the majority owner of Five Forty Aviation, which has a separate £4.4m legal dispute with the London-listed FastJet. Five Forty Aviation alleges FastJet has failed to honour a deal to repay debts that the company guaranteed with Chase Bank in Kenya – a claim FastJet refutes.

In a statement FastJet denied it owed Avmax anything, saying: "There has never been a contractual arrangement between Avmax and FastJet plc and therefore FastJet plc does not owe any money to Avmax. Don Smith, through Fly540 in East Africa entered into contractual relationships with Avmax and under these commercial arrangements owes money to Avmax for unpaid aircraft lease rentals and maintenance reserves."

A spokesman for Mr Smith wholly denied that, saying: "The admission document for the listing of Fastjet on AIM states that it owns 90pc of Fly540 Tanzania through its acquisition of Lonrho Aviation (BVI) Ltd. As such, the action taken by Avmax against Fly 540 Tanzania has no implications for Five Forty Aviation or its chief executive, Don Smith."

FastJet also maintained that Avmax’s notice related to a single Canadair Regional Jet parked in Nairobi, though the letter refers to three aircraft.

Asked for comment Mr Parkin said: "I am flying to Kenya. We have studied the documents relating to FastJet’s acquisition of Fly540 and feel there is a legal link between Fly540 Tanazania and FastJet. The Tanzania business owes us almost $2m. I plan to pursue it in court."

The dispute over unpaid leasing bills is the latest to hit FastJet, which is also facing a £1.5m tax claim from Tanzanian authorities and claims in Kenya over allegedly unpaid fuel and maintenance bills.

FastJet was formed last June via a £55m all-share deal that saw Lonhro’s African aviation wing reverse into Aim-listed Rubicon Diversified Investments. The company was renamed FastJet – a brand owned by Sir Stelios, who was handed a 5pc stake and took a €50,000 (£43,500) per month consultancy fee. Operating in Kenya, Tanzania, Angola and Ghana, FastJet said it would "give people used to 12-hour bus rides the option to fly".

Clearly this shot over the bow should be ringing the alarm bells in the FastJet head office in East Africa but also in Sir Stelios’ executive suite in the UK, as it would add to the already considerable headaches the top executives of FastJet must have at this moment in time vis a vis their nightmare relationship with Fly540 in Kenya and the pending legal case over nearly 7 million US Dollars claimed from them by one Don Smith. Add to that the more recent claims vis a vis alleged legacy debts by Fly 540 Tanzania and it seems there is a perfect storm brewing high up in the skies with the oxygen clearly running low.

Aviation is a business where trust and standing in the eyes of the public matter a lot and as a long time aviator and aviation buff turned aviation scribe it gives really no pleasure to have to write about these downsides of the aviation business. Jokingly we always say: ‘How do you get rich in aviation’ and the answer, by all in the know, sounds always like: ‘By starting out very very rich (and losing a lot of that money in the process)’. Here, as seen before with upstarts in Uganda and elsewhere in the region, this seems once again a distinct possibility now.

The concept of Low Cost Carriers in East Africa, for this correspondent at least, is fundamentally flawed as the substantially lower cost such carries incur in Europe, by using secondary airports many miles away from the main urban centres, are simply not available in East Africa. Handling and fuel too cannot be sourced from other cheaper suppliers and the main routes flown, those with sufficient traffic to perhaps fill an aircraft of the size of the A319,, are but few and crowded as they are. There is no room to negotiate, as LCC’s do in Europe, for lower parking, landing and navigational fees with airports in the region, as those airports have no reason to give away money. That is apart from the inevitable and serious repercussions airports would have with the other airlines using such airports and paying the published fees, which airports, as state corporations, have to reveal annually. And with the type of aircraft selected, an Airbus A319, FastJet basically ruled out establishing a network into secondary and tertiary airports and aerodromes, where at best only twin engine turboprop aircraft can land.

It always was a tough proposition to break into the East African market and being literally forced by the now know circumstances to start up in Tanzania instead of the wish destination Kenya, could not have made things any better.

Time to sit back and await reactions and more so, wait and see the next moves and countermoves between the the erstwhile partners grown protagonists. Watch this space.