Nico Bezuidenhout. Picture: FREDDY MAVUNDA
Nico Bezuidenhout. Picture: FREDDY MAVUNDA

Fastjet is considering expanding in SA as new CEO Nico Bezuidenhout evaluates growth opportunities for the unprofitable discount airline and says the country is too big to stay out of.

While the Africa-focused carrier already connects Johannesburg with its hubs in Tanzania and Zimbabwe, it has no internal services in SA.

The market "cannot be ignored", Bezuidenhout said in an interview in Johannesburg, where he is relocating Fastjet’s headquarters from London after joining the company in August.

Bezuidenhout is starting to identify growth opportunities after beginning a fleet overhaul and cutting weaker routes to reduce costs and stem losses at Fastjet, which he expects will break even at a cash-flow level from the fourth quarter of 2017.

The carrier has not made an annual profit since it was started in 2012. The CEO previously ran budget carrier Mango Airlines for 10 years and had spells as head of South African Airways (SAA).

Bezuidenhout said he would like to make progress in SA next year, although Fastjet would have to comply with regulations that capped foreign ownership of the country’s airlines at 25%.

The company is owned by institutional shareholders and Easygroup, the investment vehicle of EasyJet founder Stelios Haji-Ioannou, according to data compiled by Bloomberg.

All options

"Would we consider entering a joint venture agreement?" the CEO said. "Would we consider M&A [merger and acquisition] activity or would we consider partnering with somebody and doing a greenfield operation? I think all of those options are on the table."

If Fastjet entered SA ,the airline would compete with Bezuidenhout’s former employers SAA and Mango. Other carriers in the market include FlySafair and Comair, which operates British Airways flights in the country and owns discount airline Kulula.

"The South African aviation market is reasonably overtraded," Bezuidenhout said. "When one enters this market, you have to do it carefully and in a considered and measured manner. So we are working on developing that plan."

Fastjet is also evaluating expansion in other markets in Southern Africa, although Bezuidenhout said it would resist deploying excess capacity by adding routes too quickly, describing that as "the quickest way that you drive an airline into the ground".

The shares have slumped 78% this year in London, valuing the airline at £14.8m. The stock was little changed at 15.25 pence on Wednesday.

Former CEO Ed Winter quit in March following pressure from investor Stelios, as the entrepreneur is known.

Bezuidenhout declined to comment on the potential size of Fastjet’s third share sale in two years, announced last week along with the resignation of chairman Colin Child.

He said he was "cautiously optimistic" that Stelios would participate as he supported changes, including a switch to Embraer SA E190 regional jets from larger Airbus Group SE A319s.

Two-thirds of the company’s A319 planes had been removed from the fleet and seat occupancy rates had risen with the first of the smaller models, Fastjet said in a November 25 statement. The airline expects to reduce operating costs by as much as 15%.

Bloomberg

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