TIDMFJET
RNS Number : 8781J
Fastjet PLC
05 April 2018
5 April 2018
fastjet Plc
("fastjet", the "Company" or the "Group)
Trading Update
Further to the announcement issued on 29 September 2017,
fastjet, the low-cost African airline, today announces its
intention to exercise its option to purchase three ATR 72-600
("ATR") turbo-prop aircraft and the entering into of a US$12m loan
agreement with Solenta Aviation Holdings Limited ("SAHL").
HIGHLIGHTS
-- Underlying trading for the year ended 31 December 2017 broadly in line with expectations
-- Continued stable trading in Tanzania and strong performance in Zimbabwe
-- Early signs indicate a successful market entry into
Mozambique with flights achieving load factors of 70% in
aggregate
-- Re-fleeting program resulting in significant improvement to
load factors and revenue per seat
-- fastjet (produced 759,162 seats) carried 535,363 passengers
at an average load factor of 71% in 2017, an improvement in excess
of 30% compared to a 54% system-wide load factor achieved in
2016
-- Exceptional cash costs of US$4m incurred in December 2017 due to engine failure on the A319
-- US$12m loan agreement entered into with SAHL to fund the
exercise of the Company's option over the three ATRs
Rashid Wally, fastjet's Chairman, commented:
"Whilst 2017 presented some operational challenges for the
group, it has been encouraging to see the rightsizing of fastjet's
fleet beginning to yield positive results. The recent improvement
in our trading performance in Zimbabwe and Tanzania combined with
the successful launch of services in Mozambique gives us increased
confidence in our growth strategy and the Board is confident of
achieving a positive cashflow from operations for 2018."
Nico Bezuidenhout, fastjet Chief Executive Officer,
commented:
"We are excited by the expected entry-into-service of turbo-prop
aircraft during June 2018. This aircraft type serves a particular
purpose in that certain short-haul routes with shorter runways now
become accessible to fastjet, whilst the fuel-efficient nature of
the aircraft will stand us in good stead in an environment where
fuel prices have shown an upward trend."
Operational update
Fleet
The Group's fleet consisted of three Airbus A319 aircraft and
one wet-leased Embraer E190 at the start of 2017. The Board is
pleased to report that the phase-out of the 145-seat A319 aircraft
previously operated within Zimbabwe and, predominantly, within the
Tanzanian market, was concluded during January 2018 when the last
Airbus aircraft was returned to the lessor. In its place the
Company introduced two 104-seat Embraer E190 aircraft, commencing
full scheduled operations during January 2018 after an extensive
certification process. These changes are part of a comprehensive
re-fleeting program, with a better supply-demand match being a core
element of the stabilisation plan launched by the Company in H2
2016.
The next step in this re-fleeting exercise, announced in
September 2017, will see fastjet introduce three 70-seater ATR-72
turbo-prop aircraft, aimed at gaining access to runways and markets
previously inaccessible due to the Company's historic jet-only
operations, whilst also complimenting existing aircraft types in
between the 50 and 100 seater gauge sizes.
fastjet Tanzania
fastjet remains the leading airline in Tanzania and continues to
see stable trading in its largest market. The Company plans to
increase utilisation of its current E190 fleet in Tanzania, and,
subject to receiving regulatory approval, plans to announce new
route launches in Tanzania in the coming months.
Initial indications are that the right-sizing of capacity to
demand is yielding the expected benefit, notably:
-- as evidenced in year-on-year load factor improvements achieved within Tanzania:
TANZANIA LOAD 2017 2018 % Change
FACTORS
--------------- ----- ----- ---------
Quarter 1 62% 76% +23%
--------------- ----- ----- ---------
-- supported by an approximate 7% year-on-year increase in
average fare per passenger across Tanzanian operations in Q1 2018,
the first year-on-year average fare growth in this market since
late 2016; and
-- manifesting in robust growth in Tanzanian revenue per
available seat produced, achieving year-on-year growth of
approximately 29% in Q1 2018, the second highest year-on-year
quarterly growth for this measure in Tanzania over the last 13
quarters.
During the last quarter of 2017 the Company had an unexpected
engine event with the A319 aircraft, leading to unplanned
exceptional cash costs of US$4m. In addition, the impact on
revenues of this engine event together with a slightly longer than
anticipated start-up period for the E190s, due to regulatory
procedures in Tanzania, was approximately US$3m.
fastjet Zimbabwe
The political climate in Zimbabwe led to some volatility in
trading in the period leading up to the Presidential change in
November 2017. However, fastjet has since seen some of its
strongest trading in the country since commencing operations,
realizing strong quarterly growth in load factor:
ZIMBABWE LOAD 2016 2017 % Change
FACTORS
--------------- ----- ----- ---------
Quarter 1 36% 50% +39%
--------------- ----- ----- ---------
Quarter 2 37% 85% +130%
--------------- ----- ----- ---------
Quarter 3 67% 78% +16%
--------------- ----- ----- ---------
Quarter 4 62% 76% +23%
--------------- ----- ----- ---------
Whilst the trading performance in Zimbabwe has been robust,
hard-currency availability and fastjet's ability to repatriate
funds from Zimbabwe remains challenged and adversely impacts the
Company's overall liquidity position.
fastjet Mozambique
Under the brand license agreement with Solenta Aviation
Mozambique, the first fastjet-branded flight in Mozambique took
place on 3 November 2017. Although still in its early stages, this
market entry has so far proven highly successful with flights
between the major urban centres of Maputo and Nampula, and Beira
and Tete achieving load factors of 70% in aggregate.
fastjet Mozambique and LAM, the National Carrier of Mozambique,
on 21 March 2018, announced the formation of a strategic commercial
partnership between the two airline brands that will see the
parties cooperate on a number of commercial dimensions, including
network and fleet planning, maintenance and operational support as
well as sales and distribution.
fastjet Brand
The Company has continued to build the fastjet Brand, acquired
in 2017 for a payment of US$2.5m, and in January 2018 was awarded
the AWT Award as Best LCC in Africa, adding to similar accolades
received from SkyTrax and the World Travel Awards in 2017. The
Company realized approximately US$250,000 in Q1 2018 revenue from
the brand license agreement entered into with Federal Airlines in
South Africa, announced in September 2017.
ATR Letter of Intent and Memorandum of Understanding
On 29 September 2017 the Company entered into a Letter of Intent
("LOI") with ABRIC Leasing Limited, a member of the ACIA Aero
Capital Group of Companies ("ACIA"), to provide fastjet with access
to the three ATRs by way of a 10-year operating lease, along with
an option to purchase the three ATRs. The exercise of the option to
purchase is subject to approval by Export Development Canada
("EDC") as ultimate owner of the ATRs. The three aircraft are
valued at approximately US$42m in aggregate, with outstanding debt
of approximately US$30m repayable in quarterly installments over
the next nine years. Under the LOI, fastjet are due to pay ACIA an
option deposit of approximately US$11m ("ATR Purchase Option
Deposit") for the purpose of acquiring the economic rights to the
aircraft (as explained in the circular to shareholders dated 2
October 2017).
EDC have now indicated their approval in principle to the
proposed transaction, subject to due diligence and legal
documentation, and accordingly fastjet has agreed to exercise its
option to purchase the ATRs and for this purpose to enter into a
Memorandum of Understanding ("MOU") with ACIA and its associated
companies to implement the proposed transaction.
In accordance with the MOU:
-- fastjet provides notice of its exercise of the option to
purchase the aircraft, by means of a novation of the existing
head-lease held by ACIA, subject to final EDC approval;
-- In the event that EDC fails to provide the requisite
approval, ACIA and fastjet will seek to put in place an appropriate
sub-lease arrangement instead, providing substantially the same
economic benefits to fastjet; and
-- Following service of formal notice the parties will have 90
days in which to complete the novation or sub-lease arrangements
and, in the event that neither occurs, fastjet shall, subject to
certain conditions, have a right of refund of the ATR Purchase
Option Deposit.
Financial update
Group-wide cash balances as at 28 February 2018 was US$10.3m, of
which US$6.4m represented restricted cash in Zimbabwe.
Shareholder loan facility agreement ("the Facility")
On 4 April 2018 the Company entered into a US$12m loan facility
agreement with SAHL to fund the exercise of the Company's option
over the three ATRs with the balance to be used for general working
capital purposes. The salient terms of the Facility are as
follows:
-- The Facility is for US$12m to be provided by SAHL to fastjet;
-- Interest Rate of (i) the higher of US$ 30-day LIBOR and 6.45%
pa or 8% pa until 30 June 2019, and (ii) from 1 July 2019, the
higher of US$ 30-day LIBOR and 8.45% pa or 10% pa;
-- Repayment of Loan by either (at fastjet's election) bullet
repayment in full on 30 June 2019 or eight quarterly instalments of
12.5% of the Loan, commencing 29 March 2019 and concluding 28
December 2020;
-- Drawdown of the Facility is available until 30 April 2018, or
such later date as the parties may agree and subject first to
satisfying certain conditions precedent including execution and
delivery of security for the Loan;
-- The required security for the Loan comprises security over
certain key material assets of the fastjet group including the
fastjet trademarks, the shares held by the group in fastjet
Zimbabwe Limited, the shares to be acquired by the group in Federal
Airlines (Pty) Limited ("FedAir") (if and when acquired), and the
economic rights of the group to be acquired in the three ATRs;
-- The security includes an SAHL right to nominate directors to
the boards of FedAir and fastjet Zimbabwe Limited together with an
additional director to the board of Fastjet PLC (such nominated
individuals in each case to constitute a minority of directors of
the respective boards of the companies).
-- fastjet will utilise the Facility for the purpose of the
payment of the ATR Purchase Option Deposit of approximately US$11m.
Fastjet's rights of refund of the ATR Purchase Option Deposit
prescribed under the MOU may be offset against capital payments
under the Facility;
-- SAHL is entitled to a fee of US$240,000 on the date of drawdown of the Facility; and
-- The Facility Agreement includes standard representations,
warranties and events of default, including restrictions on future
borrowing and security (subject to exceptions).
Related Party Transaction
SAHL and ACIA are considered to be related parties to the
Company by virtue of SAHL being a Substantial Shareholder as
defined in the AIM Rules and as such, the entering into of the
Facility Agreement constitutes a related party transaction pursuant
to AIM Rule 13. The Directors of the Group consider that, having
consulted with the Company's Nominated Adviser, the terms of the
transaction are fair and reasonable in so far as its Shareholders
are concerned.
Outlook
Whilst the delays introducing the new aircraft onto our routes
have been frustrating, it has been pleasing to see the positive
impact of right sizing our fleet on both load factors and prices.
The combination of strong trading in our established markets of
Tanzania and Zimbabwe, together with the anticipated increase in
routes following the introduction of the ATRs, and expected further
growth in Mozambique, is another step forward in fastjet's long
term ambition to become the leading pan African low cost
airline.
This announcement is released by fastjet plc and contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Michael Muller, Chief Financial
Officer.
For more information, contact:
fastjet Plc Tel: +27 (0) 10 070 5151
------------------------------------------------------ -------------------------
Nico Bezuidenhout, Chief Executive Officer
Michael Muller, Chief Financial Officer
------------------------------------------------------ -------------------------
UK media - Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
------------------------------------------------------ -------------------------
Angharad Couch, Eleni Menikou, Toby Moore, Nick Hayns
------------------------------------------------------ -------------------------
South African media - Hein Kaiser Tel: +27 (0) 82 520 0555
------------------------------------------------------ -------------------------
For investor enquiries please contact:
------------------------------------------------------ -------------------------
Liberum Capital Limited - Nominated Adviser and Broker Tel: +44 (0) 20 3100 2222
------------------------------------------------------ -------------------------
Clayton Bush, Jill Li, Neil Elliot
------------------------------------------------------ -------------------------
NOTES TO EDITORS
About Fastjet Plc
fastjet is a multi-award winning (including Skytrax World
Airline Awards Best Low-Cost Airline in Africa 2017) low-cost
African airline for everyone. It began flight operations in
Tanzania in November 2012, flying passengers from Dar es Salaam to
just two domestic destinations - Kilimanjaro and Mwanza. Today,
fastjet's route network includes Tanzanian domestic routes from its
Dar es Salaam base to Kilimanjaro, Mbeya, and Mwanza, and
international routes from Tanzania to Lusaka in Zambia and Harare
in Zimbabwe. fastjet also began flight operations from its Zimbabwe
base in October 2015, and now flies domestically from Harare to
Victoria Falls, Harare to Dar es Salaam and internationally from
both Harare and Victoria Falls to Johannesburg in South Africa. The
airline has flown over 2.5 million passengers with an impressive
aggregate 94% on-time performance, establishing itself as a
punctual, reliable, and affordable low-cost carrier.
IMPORTANT INFORMATION
This Announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
plans and its current goals and expectations relating to its future
financial condition and performance and which involve a number of
risks and uncertainties. The Company cautions readers that no
forward-looking statement is a guarantee of future performance and
that actual results could differ materially from those contained in
the forward-looking statements. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements sometimes
use words such as "aim", "anticipate", "target", "expect",
"estimate", "intend", "plan", "goal", "believe", or other words of
similar meaning. By their nature, forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances, including, but not limited to, economic and
business conditions, the effects of continued volatility in credit
markets, market-related risks such as changes in the price of
commodities or changes in interest rates and foreign exchange
rates, the policies and actions of governmental and regulatory
authorities, changes in legislation, the further development of
standards and interpretations under International Financial
Reporting Standards (IFRS) applicable to past, current and future
periods, evolving practices with regard to the interpretation and
application of standards under IFRS, the outcome of pending and
future litigation or regulatory investigations, the success of
future explorations, acquisitions and other strategic transactions
and the impact of competition. A number of these factors are beyond
the Company's control. As a result, the Company's actual future
results may differ materially from the plans, goals, and
expectations set forth in the Company's forward-looking statements.
Any forward-looking statements made in this Announcement by or on
behalf of the Company speak only as of the date they are made.
Except as required by the Financial Conduct Authority (the FCA),
the London Stock Exchange or applicable law, the Company expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained in
this Announcement to reflect any changes in the Company's
expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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