LONDON (Alliance News) - fastjet PLC on Friday said Non-Executive Chairman Colin Child has resigned from the company as it continues with its 'stabilisation plan', including moving its head office to Johannesburg from London.
The low-cost African airline said that, having led a fundraising exercise in July, Child believes "it would not be appropriate" for him to continue as chairman, given the company is initiating a further fundraising exercise sooner than originally expected.
Chief Executive Nico Bezuidenhout will assume the role of interim chairman until a replacement is appointed.
"Although the trading and operational environment has been challenging, I have much enjoyed my time on the fastjet board. I leave the board with an extremely good and experienced CEO in place and I have every confidence that he will successfully complete the stabilisation plan and pursue some exciting strategic initiatives that will allow fastjet to deliver its full potential," Child said in a statement.
fastjet added that it is transitioning its fleet from the existing 145-seat A319 aircraft to smaller aircraft, under its stabilisation plan, initially through short-term wet leases to be superseded by dry leases at the start of the second half of 2017.
Wet leases cover aircraft, crew, maintenance and insurance. Dry leases cover aircraft only.
Two-thirds of the A319 aircraft have now been removed from the fleet and the first wet-leased Embraer e-Jet E190 was introduced in Tanzania in October.
fastjet said it remains confident it will achieve its original expectation of a 10% to 15% reduction in operating costs, noting that seat occupancy rates on flights conducted with the E190 have to date shown an 18 percentage point increase, while average yields have risen by 12%.
In addition, fastjet has been aggressively rationalising its route network and reducing frequencies to more sustainably match supply levels with demand. This process is now nearing completion, fasjet said, with rationalisation of flight activities between Tanzania and Kenya, Tanzania and Uganda, and Tanzania and Zimbabwe taking effect on December 5.
Service frequency between Harare in Zimbabwe and Johannesburg in South Africa has been increased, while services between Johannesburg and Victoria Falls in Zimbabwe will be suspended from next month.
Meanwhile, fastjet has commenced the process of relocating its head office function in London to Johannesburg, expecting to complete the process by March 2017. The company expects annualised head office cost savings of 35%, while achieving increased responsiveness to passenger needs resulting from being closer in proximity to its operating markets.
It has also embarked on an organisational restructuring process in Zimbabwe and Tanzania, which it said will result in significant cost savings by reducing the size of its expatriate workforce and relying more on local talent.
Finally, fastjet has integrated a global distribution system which facilitates access by travel agencies to its inventory, generated its first passenger-flows from its interline agreement with Dubai-based airline Emirates, and introduced new fare products aimed at connecting its various routes into single passenger journeys. fastjet said those measures, along with continued leverage of its growing social media presence, have supported revenue generation despite a reduction in seats flown.
Based on the steps taken to stabilise the business, fastjet expects to see a 25% reduction in fixed operating costs and overheads year-on-year in the first quarter of 2017, and a 35% reduction in variable operating costs year-on-year amounting to USD8 million.
However, additional costs associated with the plan, in particular the cost and terms associated with returning leased aircraft, have been more "onerous" than previously expected and placed greater strain on available cash resources, fastjet said.
It is for this reason that the company needs to raise further capital, for which it will initiate a fundraising exercise in the first quarter of 2017.
"The journey has not been a straightforward one but with our costs due to substantially reduce in the new year as various legacy and restructuring costs come to an end, with our revenue generating initiatives beginning to bear fruit and with various geographic and strategic expansion opportunities being identified I am confident that, with the necessary capital, the company can break even by the fourth quarter of 2017, and be well-positioned to pursue sustainable growth and value-creation for shareholders going forward," CEO Bezuidenhout said.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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