ROUTES AFRICA: fastjet to Develop Individual Business Models for International Ventures

African low-cost air service management business, fastjet, has plans to establish a pan-African network of air carriers but will explore growth into each international market on a case-by-case basis and develop a different business model for each venture, including potentially deviating from the current Airbus A319 fleet that its original business in Tanzania operates. The information, revealed to The HUB by Chief Commercial Officer, Richard Bodin, during an exclusive interview during this week’s Routes Africa forum in Kampala, Uganda, will open the door to other aircraft manufacturers and specialist lessors seeking to get involved with the expanding business.

Alongside its launch operation in Tanzania, fastjet has already revealed plans to establish new businesses in South Africa and Nigeria, the latter with local entity Red 1 Airways. It admits that its decision to invest heavily in its assets in Tanzania was probably not the best practice and is now moving to an aircraft management business in which it will franchise other carriers to fly using the fastjet brand.

For example the new Nigerian start-up will be branded as fastjet Nigeria and will bring together fastjet's strong brand, reputation, management experience and economies of scale, and Red 1's local market knowledge within Nigeria. fastjet will hold a minority shareholding in the business and a commercial arrangement will exist with the Nigerian backers for the provision of the fastjet Brand, Operational Framework and Management Services.

“We have learnt a great deal in the past 18 months and one of the key things is the need to have a strong partner on the ground. This way you are more likely to get things to happen in the timeframe you aspire too and similarly you can be perceived as an airline for the local market rather than simply a foreign business telling locals what to do,” said Bodin.

Some analysts had been surprised about fastjet’s move into Nigeria with the view that the capacity of the A319 would severely restrict the markets it could profitably serve in the country, but it now appears that the company is happy to deviate away from the traditional fleet composition of low-cost carriers, providing it is only between its different operational companies.

“It may be that a different aircraft type suits a different market operation,” said Bodin. “With our joint venture operation in Nigeria with Red 1 we are going to go through a proper aircraft evaluation process and if it turns out that a different aircraft type is better suited to the Nigerian market then that is what we will go for. It does have to be a modern jet.”

Since launching in Tanzania in November 2012, fastjet has established itself as a provider of safe, reliable air services in Africa, but it has suffered a number of internal and external issues that have impacted its business activities, most recently the departure of Executive Chairman David Lenigas. However, its performance is showing positive signs and in May revenues exceeded $1.8 million, up approximately 50 per cent compared with the start of the year with revenue per passenger increasing by 62 per cent since the beginning of 2013.

The carrier has recently been awarded licences to launch international flights from Tanzania to South Africa, Zambia and Rwanda marking a major step towards establishing the first-ever pan-African low-cost network. These route approvals have been granted by the relevant Governments under the Bilateral Air Services Agreements (BASAs) between Tanzania and the other countries.

fastjet will offer flights from Julius Nyerere International Airport in Dar es Salaam to Johannesburg, Kigali and Lusaka and is currently working to finalise schedules for the three routes. All three destinations are currently served from the Tanzanian capital with South African Airways serving Johannesburg, RwandAir flying to Kigali and Precision Air to Lusaka, but fastjet believes its low-fares will enable it to secure marketshare and stimulate the markets further.

According to Bodin, flights to Johannesburg are the most advanced with the licences being confirmed a couple of weeks ago and the Foreign Operators Permit being ratified just ahead of Routes Africa and tickets could go on sale before the end of July. “We are now just applying for slots. We are currently going through the process,” explained Bodin, “so hopefully within the next two to four weeks we will be able to go on sale and operate shortly after. We hope to be flying by the autumn.” The flight is expected to initially operate on a three or four times weekly schedule but will grow, subject to demand. Once the South African service is operational the carrier will then turn its attention to the proposed links to Kigali and Lusaka.

“We are speaking to lessors about additional aircraft. We are fortunate that lessors see us as a growth opportunity and we have a good relationship with them. We will certainly look to remain with the A319s in Tanzania and will look to grow with that fleet,” said Bodin. “There is a good market for this aircraft at the moment and rates are very attractive and we don’t see that changing for some time.”

The international network expansion in Tanzania will become the priority for the fastjet business and will mean plans to establish operations in South Africa will be put on hold, at least for the short-term. Bringing the fastjet brand to South Africa is a cornerstone in the creation of fastjet’s pan-African network but so the carrier can direct all its efforts and resources to starting its international services as soon as possible, the project will be placed temporarily on hold.

“We see South Africa as a great opportunity but we currently have limited resources,” said Bodin. “We remain totally committed to launching the fastjet brand in South Africa as soon as possible, but given all the time and effort the team has invested over the past months to secure our international route designations, we have taken the sensible decision to prioritise setting up these lucrative and high profile routes first, before turning our attention to launch the fastjet brand on domestic routes in South Africa.”

Meanwhile, fastjet continues to explore other opportunities across the continent to support its pan-African ambitions. “There are not that many countries we would shy away from if a local partner approached us with a business proposal,” said Bodin. “Nigeria had to be done this way with a strong Nigerian group and in other countries if there are investors or even in fact Governments that are happy to work this way under the franchise idea then we are happy to talk to them.”

Although fastjet remains tight-lipped on the markets for development, The HUB can reveal that the carrier is currently holding talks with representatives of two African Governments and two private investor groups about possible expansion into further countries across vast African continent. “Our problem is currently managing all the opportunities without things falling over.”

In our exclusive video interview from Routes Africa, Richard Bodin, Chief Commercial Officer, fastjet, provides more details on the carrier’s distribution channels and the amazing global recognition of the brand given the carrier only currently operates three routes in Tanzania.

https://www.facebook.com/RoutesonlineUBM/videos/10201422305301647/