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1. It would not be prudent to invest more money in route expansion in Zimbabwe until we are sure we can repatriate funds for overall liquidity. 2. I am worried that Regulators/Countries will deliberately hamper, delay, refuse routes etc to deliberately stymie our expansion plans in the knowledge that the longer the pre start route costs go on before route revenue starts, the more we will be damaged to the benefit of State Airlines.
PJ , Our board could argue with the funds available in Zimbabwe they are ready to rock and roll with expansion if given the green light by CAAZ, agree it�s not ideal not being able to use the funds for liquidity, I would be more concerned were it not for the fact there is a new Zimbabwe regime banging on foreign investors doors claiming Zimbabwe is open for business, I can not imagine Nico would commit to three ATR,s if he has no use for them in Tanzania, our TZ market is getting tougher by the day and with the introduction soon of ATCL Boeing 787 I would hope this will generate domestic traffic and connections which will obviously be fed onto ATCL but hopefully enough for all three TZ carriers to prosper, for now it�s certainly Zimbabwe that is the shining star.
The problem is that there are no USD funds in Zimbabwe; the $5 million is merely a ledger entry on Fastjet's bank account. The severe shortage of US Dollars in what is a 90% dollar based economy means that there is nowhere near enough USD currency to meet myriad demand and banks cannot fund their NOSTRO accounts outside Zimbabwe nor release USD for internal demand as there is very little to release. Zimbabwe cannot print USD bills. There are 4 or 5 piroty areas such as the military, educaton ( most children of the elite are educated abroad), medicines,fuel and imported staple foodstuffs and certainly FJET would not qualify for any of these categories. The solution would be a political settlement with major donor countries and the resumption of aid and supranational funding by the IMF, EIB etc. But this will no doubt have to wait the outcome of the election and some agreement that it was "free and fair" no matter by how much observers stretch that definition.Any decision by CAAZ is irrelevant in these circumstances..Until some sort of political solution is in sight FJET will have to wait for a currency allocation in what is along queue or hope that transport gets redesignated as a priority industry.
The share price suggests the market is not that impressed by the RNS 1 Despite all the gloss on rising load factors in TZ revenues up 7% merely seem to have met inflation 2 The non-dollars in Zimbabwe 3 "tradingbroadly in line in line" = "just short of expectations" 4 ATR costs 5 The cost of the loan: 30 day LIBOR has been rising sharply and is now over 1% for the first time in 7 years and is now just short of 2% and contiuing its climb: the benchmark interest rates ar enow 8.33% and 10.33% respectively with a further rise likely. Various structural changes in the EuroDollar market could under-pin further increases. I think Nico and his team have done a commendable job and it is unfortunate that liqudity and funding costs are being compromised by exogenous factors. .
Actually the cost of the loan is nearer 8.7% and 10.7% given that that would seem to have to settle interset on a quarterly basis.