FJET.L Regulatory News (FJET)

fastjet plc

("fastjet" or the "Company")

26th June 2014

Final Results for the year ended 31 December 2013

fastjet, the low cost African airline, announces its audited final results for the year ended 31 December 2013 and operational highlights of 2014 to date.

Operational Highlights

· Establishment of the low cost carrier model in Africa

· Solid growth of domestic routes in Tanzania

· Launch of first international route between Tanzania and South Africa

· Restructuring of the legacy Fly 540 businesses initiated

Financial Highlights

· Group revenue increased by 154% from $21.0 million to $53.4 million of which $26.0 million is attributable to Tanzania in 2013

· Operating loss before exceptionals of $47.6 million of which $21.9m is attributable to Tanzania

· Average load factor for the year of 72%

· Average 2013 revenue per passenger rose from $46.30 to $95.20; average revenue per passenger for the year of $71.10

2014 Operational Highlights

· Disposal of Fly540 Kenya

· Second international route launched between Tanzania and Zambia; launch of third route from Tanzania to Zimbabwe imminent

· Launch of new domestic route in Tanzania; capacity increase on existing routes

· Board strengthened by new appointments

· Successful Placing and Open Offer

Ed Winter, Chief Executive commented

"2013 was a very significant year for fastjet with the Company proving the low cost airline model in Tanzania works. In the first half of 2014 we have built upon that foundation and continued to grow, moving towards our vision of becoming a true pan African low cost airline."

"Our recent succesful fundraise moves us even closer to that goal, and I am delighted with the encouraging response we received from the market generally, and fastjet shareholders specifically, demonstrating support for our strategy and vision. "

"The disposal of fly540 Kenya, which was announced yesterday, is a hugely significant step that allows us to fully pursue our expansion in East Africa."

"Our experience to date confirms our long-held view that people across Africa are embracing the opportunities offered by fasjet's reliable, safe and great value air travel."

"The combination of the management team's experience in Africa and fastjet's stronger financial position means that we are now ready to continue our expansion and leverage our first mover advantage to the benefit of passengers and shareholders alike."

The full Group financial statements is available on the Company's website at www.fastjet.com.

Enquiries

For further information, please contact:

 fastjet Plc Tel: +44 (0) 20 3651 6355

Ed Winter

Angus Saunders

 W.H. Ireland Ltd. Tel: +44 (0) 20 7220 1666

James Joyce

Nick Field

Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571

Angharad Couch

Eleni Menikou

NOTES TO EDITORS

About fastjet plc

fastjet Plc is the holding company of the low-cost airline fastjet which commenced flight operations in Tanzania in November 2012. The airline operates a fleet of distinctively branded Airbus A319s and since its launch has grown to encompass the key domestic routes within Tanzania and a rapidly increasing number of international destinations. By adhering to international standards of safety, quality, security and reliability, fastjet has brought a new flying experience to the African market at unprecedented low prices.

fastjet is implementing the low-cost carrier model across Africa and its long-term strategy is to become the continent's first low-cost, pan-African airline. fastjet Plc is also the holding company of airline Fly540, which operates in Kenya, Ghana and Angola.

By offering one way fares from as low as $20, fastjet has stimulated a new customer base; the results of a customer survey showed that 38% of fastjet passengers had never flown before. This democratisation of air travel is expected to gather momentum across the final continent to experience the low-cost airline revolution.

fastjet is committed to communicating effectively with its existing and potential customers and has, to date, won a number of marketing awards. With over 140,000 social media followers, it occupies a unique position in African aviation.

fastjet Plc is quoted on the London Stock Exchange's AIM market.

For more information see www.fastjet.com 

Chairman and CEO's review

Following launch on 29 November 2012, fastjet rapidly developed a reputation for reliability and punctuality. This reputation led to the low cost model of booking early for the cheapest prices being rapidly adopted by Tanzanian passengers. Punctuality (arrival with 15 minutes of schedule) has been in excess of 95% and cancellations less than 1%. This has enabled effective revenue management with early booker paying US$20 plus taxes one way and customers booking on the day paying upwards of US$200. Yield per passenger grew from US$47 in January 2013 to US$97 in December 2013. The market has been hugely stimulated with 38% of passengers in the first 5 months being first time flyers.

Although the yield is at a level which could provide a profitable operation, resources are not being utilised fully and capacity needs to increase before fixed cost and overheads can be fully covered.

Higher frequencies and more international routes are being progressively introduced to increase aircraft utilisation from 5.7 hours per day in Q1 2014 up to a planned 11.7 hours per day by end of Q3 2014.

Almost twice the number of seats will be available with virtually the same fixed costs (Aircraft Leases, Insurance, Fixed Maintenance etc.) and overheads, generating a forecast 53% drop in Fixed Cost per Available Seat Kilometre (CASK) and a forecast 27% reduction in Total CASK.

Fly 540

All of the Fly 540 operations inherited from Lonrho Aviation have been disappointing and have not performed as contemplated at the time of the acquisition.

Fly 540 Tanzania. This was a very small operation and was replaced by fastjet Tanzania in November 2012.

Fly 540 Kenya. Following a thorough and lengthy evaluation of Fly 540 Kenya, the company concluded that converting the business into the fastjet low cost model would not be economically viable. All legal and financial ties between Fly 540 Kenya and the fastjet group have been removed, and fastjet is fully indemnified against any and all liabilities relating to Fly 540 Kenya.

Disposing of the investment in Fly 540 Kenya, allows fastjet Plc to pursue its priority objective of creating fastjet Kenya as a new entity which will operate to the same low cost model and high standards as fastjet Tanzania and use the same distribution platforms.

Fly 540 Ghana. Operations are currently suspended pending completion of restructuring. There are infrastructure issues at Ghanaian airports that need rectification prior to the introduction of a fastjet operation. The country is also currently suffering from adverse economic conditions with the Ghana Cedi / US$ exchange rate deterioration over the past year adding considerable costs to aviation where many costs are US$ denominated. fastjet Plc remains confident that West Africa and Ghana in particular presents very significant long-term opportunities for the fastjet low cost model. Fly 540 Ghana had an $11.7m adverse impact on the financial results of the group in 2013.

Fly 540 Angola. Operations are currently suspended pending completion of restructuring. Although Angola, with its lack of current air capacity and rapid GDP growth, represents an opportunity, the difficulties of remitting currency, government imposed competitive restrictions and the logistical hurdles of importing aircraft spares make this a poor investment opportunity at the current time. Fly 540 Angola had a $22.8m adverse impact on the financial results of the group in 2013.

During 2013 less than $650,000 of fastjet Plc cash was utilised in the legacy Fly540 operations. 

Changes to the board

On 10 June 2013 David Lenigas resigned as Executive Chairman.

Having been Executive Chairman since launch and making an invaluable contribution leading the Company successfully through its first year, David stepped down in order to concentrate on his other business ventures.

On 24 July 2013 Geoffrey White resigned as Executive Director

Following the privatisation of Lonrho, Geoffrey resigned to be able to focus all of his time on the Lonrho core businesses. He had been an Executive Director of fastjet since the beginning and provided the Board with great support with his unrivalled African experience and knowledge.

On 1 June 2014 Krista Bates was appointed as Executive Director and General Counsel

Krista had been providing legal services to fastjet for the previous 20 months through her role as a corporate consultant at a leading Nairobi law firm. Her appointment deepens fastjet's legal and strategic capabilities across Africa and the UK as the Company expands its operations and continues to develop strategies against Africa's complex legal and political background. Having Krista as a part of the team will be a huge advantage, given her wealth of experience and knowledge gained in both UK and Africa.

On 1 June 2014 Richard Bodin, Chief Commercial Officer, was appointed as Executive Director

Richard was a part of the team that developed the original fastjet business plan, and as Chief Commercial Officer he played a vital role proving the low cost model can be successful in Africa. His input will be invaluable at Board level.

On 1 June 2014 Clive Carver was appointed as Non-Executive Director

Clive's appointment adds another dimension to the Board. Clive adds essential and extensive city experience to the Board as the Company moves forward in this next phase of development. His experience and reputation, gained working in corporate finance both with merchant banks and broker Finncap and his position as a Board member on a range of companies will be a real asset to the Board.

Funding

Bergen Global Opportunity Fund

On 21 June 2013 the Company made the final conversion of securities issue to Bergen Global Opportunity Fund. In the year ended 31 December 2013 the facility was used to raise $4.2m (£2.6m)

Darwin Strategic Limited

On 10 April 2014 the Company terminated the Equity Financing Facility ('EFF') with Darwin Strategic Ltd which was originally announced on 13th June 2013 and further extended on 12th March 2014. This facility has served the Company well, providing capital to allow the Company to successfully reach its current position from where it can now expand, but is no longer required to finance further growth.

In the year ended 31 December 2013 the facility was used to raise $24.9m (£15.9m)

Fund raising in 2014

Having proved the low cost model in fastjet Tanzania the Company was able to complete a very successful fund raising in April 2014. Gross proceeds of $24.8m (£14.9m) were raised through a placing and an open offer. The $18.2m (£11m) placing brought a number of key institutional investors, Standard Life, Henderson Global, Majedie and City Financial on to fastjet's share register with management also investing over $1.6m (£1m). Director's shareholdings are now: Edward Winter 31,300,000, Angus Saunders 6,250,000, Richard Bodin 3,125,000 and Robert Burnham 147,305.

Sir Stelios Haji-Ioannou invested $1.6m (£1m) in the placing and also agreed to terminate the Management Fee in exchange for $2.5m (£1.5m) in shares at the placing price. This replaces 8 years at 605k euro per year plus inflation. In money of the day terms easyGroup exchanges a receivable of £4.3m in return for equity valued at $2.5m (£1.5m) as another show of confidence. The rest of the Brand Licence and royalty remain in place unchanged until July 2022 at which time fastjet will own the brand.

The funds raised in April have been allocated to funding fastjet Tanzania until it becomes cash flow positive, funding central services and improving IT capability to support future bases, initial capital to set up licences and approvals for future bases, which at the moment are planned to be in Zambia, Kenya and South Africa with a level of contingency to cover the unpredictable timing of African government approvals.

Once each base is ready to commence operations further capital will be required to launch services. fastjet Plc capital contribution will depend upon the level of local equity raised.

Current trading

Capacity has increased over the past months with total seats flown in May increasing to 60,320 from 54,230 in April, an 11% increase. Year on year seats increased by 68% and revenue increased by 81% compared to May 2013.

Individual route increases have been Dar es Salaam to Lusaka - 27% (May vs April); Dar es Salaam Mbeya - 43% (May vs April); Dar es Salaam to Mwanza 23% - (April vs March). Tanzanian domestic routes have come under increased competitive pressure over the past few months with irrational pricing behaviour from both Precision Air and Air Tanzania. Management do not see this as a long term threat and our increased frequencies are combating that pressure.

A new international route from Dar es Salaam to Harare, Zimbabwe is now on sale, with first flights scheduled to operate on 2nd August. More international routes will be announced in the near future.

Regulatory environment

Although there have been many declarations of an intent to liberalise the aviation market in various parts of Africa, there has been very little regulatory freedom put in place. As a consequence aviation regulation in Africa is very similar to Europe pre 1990s. Each country has individual regulatory requirements regarding control and ownership for an airline company wishing to operate within or from that country. Additionally flights between countries are controlled through Bilateral Air Service Agreements which are unique to each pair of countries. Airlines operating between countries also need to obtain a Foreign Operator Permit giving approval for their crewing and maintenance arrangements.

The Company continues to lobby at the highest level of governments and within the industry to promote relaxation of the regulatory environment regarding route rights.

On the other hand the regulatory environment regarding operating standards and safety within the industry is variable and in some cases well below international standards. As a consequence, fastjet imposes constraints on its own operations to comply as though the airline was regulated in Europe. The Company takes every opportunity to lobby for improved safety and operational regulation and oversight by the various civil aviation authorities.

Future developments

The Company has a two phase growth strategy for the next 4 years.

Phase 1: Building up the Tanzanian base

Increased frequency on existing routes (Dar es Salaam to Mbeya, Mwanza, Kilimanjaro, Lusaka, Johannesburg and Harare), and adding new routes including routes to Kenya, Malawi and Uganda to fully utilise current resources.

Phase 2: Rolling-out beyond Tanzania

Tanzania, Kenya, South Africa and Zambia have been identified as major growth opportunities. There are approximately 160m people in the region with currently only 0.21 air seats per head of population per annum. By 2018, fastjet expects to operate 24 aircraft and carry 6 million passengers. This represents only a 13% market share of estimated pan African passengers in these markets.

The Company plans to make appropriate commercial and marketing links with third party airlines in particularly inter-continental airlines to increase distribution from outside of Africa.

The Company intends to increase pan-African reach using an Airline Management Service franchise model to develop a pan African fastjet network where appropriate and in particular where we want to de-risk expansion financially or politically. Negotiations are progressing in a number of countries with interested parties.

Ed Winter

CEO and Interim Chairman

26 June 2014

Our financial results

Key Performance Indicators

fastjet acquired the Lonrho Aviation business in June 2012 and the results for the 18 months to December 2012 therefore only include six months of trading for the aviation business. The amounts included in Central in Note 2 (Segmental reporting) have been excluded from the key performance indicators set out below.

fastjet Tanzania was launched in late November 2012. The results for the prior period include 5 weeks of fastjet Tanzania trading and therefore a year on year comparison is not meaningful however the progress of the core business unit over the past year is more appropriate.

As set out above the Fly540 operations in Ghana and Angola have been suspended whilst these operations are restructured and or exited. The Fly 540 operations do not form part of the core business going forward and this financial review has therefore focussed on the core business being fastjet Tanzania.

fastjet grew group revenue by 154% from $21.1 million in 2012 to $53.4 million of which $26.0 million is attributable to Tanzania in 2013.

The average load factor during the year was 72% .The average revenue per passenger has increased from $46.30 in January 2013 to $95.20 in December 2013 with an average revenue per passenger for the year of $71.10.

The group loss before tax increased from $55.2 million to $82.3 million. The operating loss before exceptionals of $47.6 million for the year was up from the prior period operating loss before exceptionals of $30.0 million. fastjet Tanzania contributed $21.9 million to these losses in 2013.

Operating cost per seat excluding fuel reduced from US$123 or 19.9 cents per available seat kilometre ('ASK') in January 2013 to US$89.0 or 11.6 cents per ASK in December 2013 with an average operating seat cost of US$87.8 or 13.1 cents per ASK.

The average fuel cost per seat was US$24.4 or 3.6 cents per ASK. fastjet Tanzania currently buys all its fuel based on the current market price. This does expose the business to fuel price volatility and any change in the fuel price will have an impact on the cost of operations. Some if not all of any fuel price increase may be recovered from passengers through a change in the fares that they are currently pay. fastjet does not have any fuel hedging in place as the quantity of fuel that it currently uses is too small for counterparties. As fastjet grows and fuel quantities increase fastjet will hedge when quantities are sizable enough for counterparties.

CASH FLOWS AND FINANCIAL POSITION

fastjet raised equity of $36.5m during the year compared to $28.6m in the prior period. The equity raised was primarily used to finance the roll out and expansion of the fastjet low cost model in Tanzania.

Subsequent to the year end the Group has raised in aggregate $27.2m which has substantially improved the Group's cash position.

At the end of the year the amount of customer payments in advance ("sales in advance of carriage") was $1.7m compared to $1.3m the previous year of which $1.4m related to Tanzania at 31 December 2013.

Going concern

The financial statements have been prepared on a going concern basis which the directors believe to be appropriate for the following reasons as also set out in note 1.

Whilst the Group has incurred losses during the year, the Directors are confident that the Group has access to sufficient finance to operate as a going concern for the foreseeable future and, in any event, for a period of at least one year from the date of approval of these financial statements.

As noted in the Strategic Report, the Company raised $23.7m net of expenses through a Placing and Open offer subsequent to the year end in April and May 2014.

The Directors have prepared detailed forecasts and projections for the company and its Tanzanian subsidiary for the 5 year period to 31 December 2018 with a particular focus on 2014 and 2015. These include revenue, profit, cashflow and balance sheet forecasts and detailed sensitivities. For fastjet Tanzania, these are done on a route by route basis.

The Directors have also considered the key risks and opportunities in preparing these forecasts as being:

· Achieving budgeted revenue growth and central to this are:

o Achieving appropriate load factors and yield;

o Obtaining permission to fly from Dar es Salaam on new international routes such as Nairobi, Entebbe and Lilongwe; and

o The competitive position of fastjet not being adversely affected.

· Keeping the cost base under tight control.

As set out in the Strategic Report the Group has severed all ties with Fly 540 Kenya and the Directors have commenced a process to sell or exit the Fly 540 operations in Angola and Ghana. This process is not yet complete and may involve payments in relation to third parties the extent of which depends upon the outcome of negotiations currently underway.

In the event that the Directors' expectations

· on the pace of the increase in passenger revenues prove to be slower than expected

· the costs associated with exiting Fly 540 in Angola and Ghana prove higher than expected

· that the pace of developing new routes is slower than expected

they acknowledge that the Group may need to raise additional finance, which if it were not then available would represent a material uncertainty that would cast doubt upon the Group's and the parent company's ability to continue as a going concern.

Nevertheless, the Directors are confident that the Group and the parent company will have access to adequate resources if required to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual financial statements.

By order of the Board

Edward Winter

Chief Executive Officer and Interim Executive Chairman

26 June 2014

Consolidated income statement

Consolidated statement of comprehensive income

All items in other comprehensive income will be re-classified to the profit or loss.

Consolidated balance sheet

These financial statements were approved and authorised for issue by the Directors on 26 June 2014 and are signed on their behalf by:

Edward Winter

Chief Executive Officer and Interim Executive Chairman

Consolidate cash flow statement

Consolidated statement of changes in equity

* The share options include warrants amounting to $544,000.

Notes to the Group financial statements

1. Significant accounting policies

fastjet plc is the Group's ultimate parent company. It is incorporated in England and Wales. The Company's shares are quoted on the AIM market of the London Stock Exchange.

The consolidated financial statements have been prepared for the year ended 31 December 2013. The comparative period is the 18 months to 31 December 2012. The consolidated financial statements include the results of the Lonrho Aviation business acquired on 29 June 2012 and, as such, the comparative results for the 18 months to 31 December 2012 only reflect 6 months trading for the acquired business.

Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention and in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the EU.

The significant accounting policies are set out below and have been applied consistently, in all material respects, throughout all periods presented in these financial statements.

Going concern

There are risks associated with operating in Africa including but not limited to political, judicial, administrative, taxation or other regulatory matters. Many countries in Africa, including those in which the Group currently operates may in the future experience severe socio-economic hardship and political instability, including political unrest and governmental change.

Most of the countries in which the Group operates have a less developed legal system than more established economies, which may result in the law being applied in an inconsistent manner and retrospective laws being promulgated by governments.

The commitment of local business people, government officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be more uncertain, creating particular concerns with respect to licences and agreements for business which may be susceptible to delay, revision or cancellation, as a result of which legal redress may be uncertain or delayed.

The Group has operated at a loss and a significant operating cash outflow since the acquisition of Lonrho Aviation in June 2012. Whilst, the revenues of the Group have increased significantly since the previous period, the Directors consider that the outlook presents significant challenges in that the Group has to continue to achieve increased sales revenue, and control input costs. Securing additional international route rights out of Tanzania are also critical for the success of the Group. Some uncertainty exists as to these matters.

Whilst the Group has incurred losses during the year, the Directors are confident that the Group has access to sufficient finance to operate as a going concern for the foreseeable future and, in any event, for a period of at least one year from the date of approval of these financial statements.

As noted in the Strategic Report, the Company raised $23.7m net of expenses through a Placing and Open offer subsequent to the year end in April and May 2014.

The Directors have prepared detailed forecasts and projections for the company and its Tanzanian subsidiary for the 5 year period to 31 December 2018 with a particular focus on 2014 and 2015. These include revenue, profit, cashflow and balance sheet forecasts and detailed sensitivities. For fastjet Tanzania, these are done on a route by route basis.

The Directors have also considered the key risks and opportunities in preparing these forecasts as being:

· Achieving budgeted revenue growth and central to this is:

o Achieving appropriate load factors and yield;

o Obtaining permission to fly from Dar es Salaam on new international routes such as Nairobi, Entebbe and Lilongwe; and

o The competitive position of fastjet not being adversely affected.

· Keeping the cost base under tight control

As set out in the Strategic Report the Group has severed all ties with Fly 540 Kenya and the Directors have commenced a process to sell or exit the Fly 540 operations in Angola and Ghana. This process is not yet complete and may involve payments in relation to third parties the extent of which depends upon the outcome of negotiations currently underway.

In the event that the Directors' expectations

· on the pace of the increase in passenger revenues prove to be slower than expected

· the costs associated with exiting Fly 540 in Angola and Ghana prove higher than expected

· that the pace of developing new routes is slower than expected

they acknowledge that the Group may need to raise additional finance, which might not then be available. 

All of these factors together represent material uncertainties that may cast significant doubt upon the Group's and the parent company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

Nevertheless, the Directors have a reasonable expectation that the Group and the parent company will have access to adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual financial statements.

Functional and presentation currencies

In June 2012 the group acquired Lonrho Aviation (B.V.I.) Limited. On that date the business changed its functional currency from Pounds Sterling to US Dollars. Net assets at that time were not material. As a result of the change in functional currency the group also changed its presentational currency.

All amounts are presented in US Dollars being the Group's presentational currency. This currency has been chosen, as it is the usual reporting currency for businesses in the aviation sector. All amounts are shown in round thousands (US$'000) except where indicated.

In preparing the financial statements of the individual companies, transactions denominated in foreign currencies are translated into the respective functional currency of the Group entities using the exchange rates prevailing at the dates of transactions.

Non-monetary assets and liabilities are translated at the historic rate. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rates of exchange ruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gains and losses are recognised directly in equity are also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case weighted average rates are used. Exchange differences arising, if any, are classified in equity and are transferred to the Group's foreign currency translation reserve within equity. Such translation is recognised as income or as expense in the period in which the operation is disposed of.

Non-GAAP performance measures

The Board believe that these measures provide useful information for the shareholders on the underlying performance of the business. These measures are consistent with how the business performance is measured internally. The adjusted operating loss is not a recognised profit and loss measure under adopted IFRS and may not be directly comparable with "adjusted" profit and loss measures used by other companies. The adjustments made to operating loss exclude exceptional charges, which are predominately one-off in nature and therefore create volatility in reported earnings.

New accounting standards, interpretations and amendments

The following standards, amendments and interpretations have been adopted for the first time in these financial statements, none of which had an impact on the Company's or Group's financial statements:

· Amendment to IAS1 Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income

· Amendment to IFRS1 First-time Adoption of International Financial Reporting Standards: Government Loans

· Amendment to IFRS7 Financial Instruments: Disclosures: Offsetting Financial Assets and Financial Liabilities

· IFRS13 Fair Value Measurement

· IAS19 Employee Benefits (2011)

· IFRIC20 Stripping Costs in the Production Phase of a Surface Mine

· Various standards resulting from Annual Improvements to IFRS 2009-2011Cycle.

Recent accounting developments

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

· IFRS 10 Consolidated Financial Statements and IAS 27 (2011) Separate Financial Statements (mandatory for year commencing on or after 1 January 2014)

· IFRS 11 Joint Arrangements and Amendments to IAS 28 (2008) Investments in Associates and Joint Ventures (mandatory for year commencing on or after 1 January 2014)

· IFRS 12 Disclosure of Interests in Other Entities (mandatory for year commencing on or after 1 January 2014)

· Amendments to IAS 32 'Offsetting Financial Assets and Financial Liabilities' (mandatory for year commencing on or after 1 January 2014)

· Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (mandatory for year commencing on or after 1 January 2014)

· Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) (mandatory for year commencing on or after 1 January 2014)

· IFRS 9 Financial Instruments (effective date to be confirmed)

· Amendments to IAS 39 'Novation of Derivatives and Continuation of Hedge Accounting' (mandatory for year commencing on or after 1 January 2014)

· IFRIC Interpretation 21 Levies (mandatory for year commencing on or after 1 January 2014)

· IAS27 Separate Financial Statements (2011)

· IAS28 Investments in Associates and Joint Ventures (2011)

Basis of consolidation

The Group financial statements consolidate those of the Company and its subsidiary companies drawn up to 31 December 2013. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. The results of subsidiaries acquired or disposed of during the accounting period are including in the Group financial statements from/to the date of acquisition or disposal, respectively. The date of acquisition or disposal is the date from/to which the Company has control over the subsidiary.

Unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

The portion of a non-controlling interest is stated at the non-controlling interest's proportion of the fair values of the assets and liabilities recognised. Subsequently, losses applicable to the non-controlling interest in excess of the non-controlling interest in the subsidiary's equity are allocated against the interests of the Group where the non-controlling interest has a specific exemption from making an additional investment to cover the losses. Future profits attributable to the non-controlling interest are not recognised until the unrecognised losses have been extinguished.

Business combinations

The acquisition of subsidiaries and businesses is accounted for using the purchase method. The cost of acquisition is measured at the aggregate of the fair values of assets given and equity instruments issued, plus any liabilities assumed. The acquired entities' assets, liabilities and contingent liabilities that meet the recognition criteria set out in IFRS 3 (Revised) are recognised at fair value.

Goodwill, being the excess of the cost of acquisition, as defined above, over the fair value of the consideration over the Group's interest in the net fair value of the assets, liabilities and contingent liabilities recognised.

The interest of non-controlling interests in the acquired entities is initially measured at the non-controlling party's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Discontinued operations

On 5 August 2011, the Company sold its entire shareholding in Rubicon Software Limited. The operations of the disposed subsidiary were classified as discontinued.

Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

Aircraft - 5% to 7% of cost

Leasehold property - term of the lease

Leasehold improvements - term of the lease

Motor vehicles - 25% of cost

Fixtures, fittings and office equipment - 15% to 25% of costPlant and machinery - 10% of cost

Goodwill

Goodwill arising on consolidation is recognised as an asset.

Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at cost less accumulated impairment losses. The recoverable amount is estimated at each reporting date. Any impairment loss is recognised immediately in the income statement.

Any impairment losses recognised in respect of cash generating units are first allocated to goodwill.

On disposal of subsidiaries, attributable goodwill is included in determining the profit or loss on disposal.

Other intangible assets

Intangible assets (other than goodwill) are recognised at cost less accumulated amortisation charges any provision for impairment. Amortisation is charged on a straight line basis, as follows:

Air operator's certificates (AOCs) - 10 years

Brand licence agreement - 10 years

Brand acquired on business combination - 2 years

Customer contracts acquired on business combination - 5 years

Computer Software - 4 years

Impairment of assets

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management.

Impairment losses for cash-generating units reduce the assets in the cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes the purchase cost of the item itself, plus any direct costs incurred in bringing the item to its present location and condition.

Leases

Operating leases

Rental charges on operating leases are charged to the income statement on a straight-line basis over the life of the lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the life of the respective asset.

Finance leases

Where the Group enters into a lease, which entails taking substantially all the risk and rewards or ownership of an asset, the lease is treated as a 'finance lease'. The asset is recorded in the balance sheet as property, plant and equipment, and is depreciated over the estimated useful life to the Group. The asset is recorded at the lower of its fair value, less accumulated depreciation, and the present value of the minimum lease payments at the inception of the finance lease. Future instalments under such leases, net of finance charges, are included as obligations under finance leases. Rental payments are apportioned between the finance element, which is charged to the income statement, and the capital element, which reduces the outstanding obligation for future instalments. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Leased aircraft maintenance provisions

The Group incurs liabilities for maintenance costs in respect of aircraft leased under operating leases during the term of the lease. These arise from the contractual obligations relating to the condition of the aircraft when it is returned to the lessor. To discharge these obligations, the Group will either need to compensate the lessor for the element of the life of the component or maintenance intervals used, or carry out the maintenance check before return of the aircraft to the lessor.

The provisions recorded and charged to the income statement are dependent on the life of the component or maintenance interval used and the individual terms of the lease.

No provision is recorded during the initial period of lease agreements where no compensation or maintenance is required prior to hand-back.

After a component or maintenance interval passes its half-life (or another more appropriate measure depending on the individual lease) and compensation would be due to the lessor in accordance with the terms of the lease, a provision and matching income statement charge is recorded equal to the amount of compensation that would be required based on the hours or cycles flown at the balance sheet date.

Where maintenance is provided under 'power by the hour' contracts and maintenance paid to maintenance providers to cover the cost of the work is deemed to be irrecoverable, these payments are expensed as incurred and maintenance provisions are reduced to reflect the fact that the Group has already paid for the related maintenance work. Maintenance deposits that are refundable are recorded as other receivables.

Estimates are required to establish the likely utilisation of the aircraft, the expected cost of a maintenance check at the time it is expected to occur, the condition of an aircraft and the lifespan of life-limited parts. The bases of all estimates are reviewed once each year and also when information becomes available that is capable of causing a material change to an estimate, such as renegotiation of end of lease return conditions, increased or decreased utilisation, or unanticipated changes in the cost of heavy maintenance services.

Revenue

Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT (or overseas equivalent).

Revenue for the provision of air travel is recognised on the date of departure. Flights paid for in advance of the date of travel are recorded as deferred income and then recognised as revenue on the date of departure.

Ancillary fees such as baggage fees are also recognised on the date of departure. Ancillary fees such as flight alteration fees are recognised on the date incurred. Credit card payment fees are recognised on the date payment is made.

Pension costs

The Group has no pension scheme for Directors or employees.

Taxation

Current tax is the tax currently payable or receivable based on the result for the period.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

Share-based payments

The Company operates equity-settled share-based remuneration plans for certain employees (including Directors) and has also issued share options to easyGroup Holdings Limited as part of the consideration for a brand licence agreement. The Company has also issued warrants in connection with share placings in the year.

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Company's estimate of the number of shares that will vest.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee.

Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate to share premium.

Operating segments

The Group's continuing business comprises a single business segment that of airline services. That business operates across a number of different geographical territories, all within Africa. Accordingly, segmental reporting disclosures are given by geographical segment only.

The role of Chief Operating Decision Maker, in the context of IFRS 8 "Operating segments" is considered to be fulfilled by the Executive Committee, which is made up of certain directors and senior management. That committee monitors the performance of the business segments and makes decisions about the allocation of resources between segments.

Financial instruments

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits.

Equity

Equity comprises the following:

· "Share capital" represents the nominal value of equity shares that have been issued.

· "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

· "Retained earnings" include all current and prior period results as disclosed in the income statement.

· "Translation reserve" represents the cumulative amount of foreign exchange gains and losses recognised outside of retained earnings.

Financial assets

All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. The Group has loans and receivables and other investments in these financial statements.

Loans and receivables are initially measured at fair value and subsequently at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.

Other investments are measured at fair value through other operating income.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are classified according to the substance of the contractual agreements entered into.

Other financial liabilities are initially recognised at fair value, net of transaction costs, and are subsequently recorded at amortised cost using the effective interest method.

The Group's financial liabilities include finance leases, borrowings, trade and other payables.

Use of estimates and judgements

The preparation of financial statements in conformity with Adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Estimates made by management in the application of Adopted IFRS that have significant effect on the financial statements with a significant risk of material adjustment in the next year are discussed in the following notes:

· valuation of Investment (note 14)

· maintenance provisions (above)

· share based payments (note 24)

· impairment of goodwill (note 11)

· impairment of other intangibles (note 12)

· impairment of aircraft (note 13)

Judgements made by management in the application of Adopted IFRS that have significant effect on the financial statements are:

· the determination of the functional currencies of subsidiaries

· the determination of the accounting treatment in respect of the acquisition of investments as either associates, joint ventures or subsidiaries (note 22)

· the determination whether certain transactions represent business combinations (note 22)

2. Segmental reporting

The Group's continuing business comprises that of airline services. That business operates across a number of different geographical territories, all within Africa. Accordingly, segmental reporting disclosures are given by geography which are the reportable segments.

The role of Chief Operating Decision Maker, in the context of IFRS 8 "Operating segments" is considered to be fulfilled by the Executive Committee, which is made up of certain directors and senior management. That committee monitors the performance of the business segments and makes decisions about the allocation of resources between segments.

The Group's continuing business commenced on 29 June 2012, on the acquisition of Lonrho Aviation (B.V.I.) Limited (see note 22) and hence the figures for the 18 months to 31 December 2012 only include six months of operations of the Group's airline business.

3. Discontinued operations

The Company sold its 100% shareholding in Rubicon Software Limited (RSL) on 5 August 2011. The activities of RSL were classed as discontinued operations in the comparative financial statements.

The amounts disclosed as discontinued in the income statement relate solely to the operations of Rubicon Software Limited and are analysed as follows:

Amounts in the cash flow statement that relate to discontinued activities are as follows:

4. Operating loss

5. Employees

The aggregate payroll costs of the above were:

6. Remuneration of Directors and other key management personnel

Remuneration of those serving as Directors during the year is analysed below:

For the year ended 31 December 2013:

For the 18 month period ended 31 December 2012:

No pension payments are made for Directors.

Bonus amount in the year ended 31 December 2013 is in respect of the eighteen months ended 31 December 2012.

Details of share options granted to the directors are as follows:

Total remuneration of senior personnel, excluding directors, amounted to US$979,000 (2012: US$457,000).

Options have been adjusted following the consolidation of shares on 22 August 2013.

7. Finance income and expense

8. Tax

Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20% (effective 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the company's future current tax charge accordingly. The deferred tax liability at 31 December 2013 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

A reconciliation of the tax expense to the reported losses is given below:

At 31 December 2013 the Group had accumulated tax losses of approximately US$67m (2012: US$34m) available for offset against future taxable trading profits. The ability to utilise these tax losses is uncertain in some jurisdictions and therefore the Directors consider it inappropriate to recognise this potential deferred tax asset until such time as the Group begins to generate taxable profits against which the losses will be utilised.

9. Discontinued Activities

The Company disposed of its interest in Rubicon Software Limited on 5 August 2011.

10. Loss per share

Loss per share is calculated by dividing the loss for the period attributable to equity shareholders in the Parent Company (as stated in the income statement) by the weighted average number of shares in issue during the period.

On 22 August 2013, a share consolidation was approved. On that date 3,052,472,570 ordinary shares of 1p were exchanged for 305,247,257 new ordinary shares of 1p and 305,247,257 deferred shares of 9p. The deferred shares of 9p carry no significant rights. The weighted average number of shares for comparative purposes have been adjusted to 68,016,521 previously 680,165,214.

The weighted average number of shares in issue during the period was 302,765,966 (2012: 68,016,521 adjusted). The loss for the purposes of basic earnings per share being the net loss attributable to the equity holders of the parent was US$74,372,000 (2012: US$52,366,000).

The options and warrants in issue have no dilutive effect in either period because the Group incurred a loss on continuing activities in both years.

11. Goodwill

For the purpose of impairment testing, goodwill is allocated to the Group's operating entities. The aggregate carrying amount of goodwill allocated to each CGU is as follows:

The goodwill recognised on business combination arising from the acquisition of Lonrho Aviation (B.V.I.) Limited on 29 June 2012, is the difference between the fair value of the consideration paid and the fair value of the net assets acquired. See note 22 for more details of this business combination.

Impairment testing for cash generating units containing goodwill

Key assumptions used in the calculation of recoverable amounts are discount rates, terminal values and EBITDA growth rates. The values assigned to the key assumptions represented management's assessment of future growth trends in aviation both in Africa and the country of operation.

Forecasts have been prepared on a value in use basis. Any significant change in the assumptions below could result in an impairment.

Angola and Ghana

As explained in the Strategic Review the Fly 540 operations are being restructured. Consequently the goodwill and other intangible assets (Note 12) have been completely impaired at 31 December 2013.

Tanzania

The recoverable amount of the Tanzania Goodwill was based on fair value calculated using discounted cash flows. The fair value was categorised as level 3. The cash flow projections include specific estimates for 4 years and terminal growth rate of 0% thereafter. As explained in the Strategic Review fastjet launched operations in Tanzania on 29 November 2012 and new routes are expected to be secured for the CGU to be fully operational. As the CGU is in a start up phase the cash flow projections include the outflows required to launch the new international routes.

The key assumptions included the timing of new routes operating, estimating forecast yields and load factors and significant costs such as those for fuel. These have been estimated based on industry experience. Frequency increases are assumed as the routes develop.

Sensitivity analysis has been performed by developing different scenarios. There are uncertainties built into the scenarios relating to the timing of international route rights being granted and the load factors and revenue yield achieved.

A weighting was allocated to each scenario to calculate an expected outcome for the year. The assigned weightings differed between the four years. The goodwill attached to the CGU was assessed against these budgeted scenarios. A weighted average discount rate of 16.6% (2012: 20%) was applied to calculate the discounted cash flows.

The discount rate was a pre-tax measure based on the risk free rate obtained from the yield on 30 year UK government bonds, adjusted for risk premium to reflect the increased risk in investing in equities of small size and specific country risk. The cost of debt was based on the average group cost of debt of 7.2%. The weighted average cost of capital was based on debt leveraging of 41%.

The estimated recoverable amount of the Cash Generating Unit (CGU) exceeded its carrying amount by approximately $40m. Management have identified that a reasonable possible change in yield and discount rate could cause the carrying value to exceed the recoverable amount. EBITDA would have to change by 42% and the discount rate increase to 36% for the estimated recoverable amount to be equal to the carrying value.

12. Other intangible assets