Bloomberg News

FastJet to Add South Africa Unit With Aid of President’s Son

April 24, 2013

FastJet Plc (FJET), seeking to become the first pan-African discount airline, said it will add flights in South Africa, backed by local investors and a 2 million-pound ($3 million) share placing with a London institution.

FastJet will start offering tickets in a few weeks for the first flight from Cape Town to Johannesburg on May 31, it said today in a statement. The London-based company traded 14 percent lower at 1.73 pence as of 11:17 a.m. in the U.K. after saying it would sell new shares in the placing at 1.25 pence apiece.

FastJet is seeking to expand beyond Tanzania, where it commenced services in November, as part of a plan to establish a low-cost African network using a fleet of Airbus SAS A319 planes. An effort to build a South African service using bankrupt local carrier 1time has been dropped, it said today.

“Air fares in South Africa have skyrocketed since 1time ceased flying at the end of last year, and many planes are operating at full capacity,” FastJet Chairman David Lenigas said in the statement. The carrier will add other routes once twice daily Johannesburg-Cape Town flights are bedded in, he said.

Presidential Link

The new unit will be established via an investment vehicle known as Blockbuster, which will be 75 percent owned by South Africans including Edward Zuma, son of the nation’s president.

FastJet, backed by EasyJet Plc founder Stelios Haji- Ioannou, said it will issue 160 million new shares to finance the expansion, with binding commitments for the placement secured from a U.K. fund that it didn’t identify.

FastJet, whose majority shareholder is hotels, ports and agribusiness specialist Lonrho Plc (LONR), has declined 55 percent so far this year, valuing it at 37 million pounds.

The company said today that it has abandoned plans to acquire South African operating rights from 1time in the absence of assurances from creditors that they would accept a bid.

The carrier will instead use a license held by Federal Airlines to commence flights after Blockbuster -- likely to be renamed FastJet Holdings in coming months -- struck a deal with the local company. Blockbuster’s involvement will also ensure compliance with South Africa’s airline ownership laws.

737 Lease Plan

Blockbuster is in talks with leasing companies about the rental of a Boeing Co. 737 aircraft and crew while it awaits approval from South African regulators to deploy A319s, FastJet Chief Executive Officer Ed Winter said in an interview.

Federal Air focuses heavily on the tourism trade, providing flights to game reserves with a variety of smaller aircraft not generally suited to FastJet’s operations. The new venture could ultimately require as many as 10 jetliners, Winter said.

“There is a real place for somebody to come in and create a competitive marketplace,” he said, adding that international operations from South Africa should follow.

FastJet has moderated its expansion plans while awaiting rights from Tanzania to fly internationally from its existing bases. It yesterday announced an agreement with Five Forty Aviation Ltd. to resolve a legal dispute over rights in Kenya which should advance plans for an operation there, Winter said.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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