Hit by financial turbulence, low-cost carrier Fastjet to fly for one more week
Low-cost carrier Fastjet says it has $6.8 million in its accounts — which is just enough to fly to Tanzania, South Africa, Mozambique, Zambia and Zimbabwe up to the end of the week.
The airline, which began operations on the continent 16 years ago with the aim of becoming Africa’s leading low-cost carrier, said it faces closure because of delays in the completion of a Solenta Aviation Holdings Ltd subscription letter.
Accordingly, it has deferred application for the admission of the new ordinary shares to be issued pursuant to the equity refinancing and the open offer,” Fastjet directors said in a trading update.
“While discussions to date with the relevant stakeholders have been positive, they are ongoing and there can be no guarantee of a successful outcome. The company is continuing to take action with a view to enabling the Gecas condition to be satisfied in the next seven days,” the airline said.
“The directors would have no choice but to formally engage insolvency practitioners to explore restructuring options (including administration) and to commence discussions with interested parties for the sale of the business and assets of the company,” Fastjet said.
Meanwhile, Fastjet Tanzania chairman Lawrence Masha has upped his stake in the new outfit, from four per cent to 68 per cent after he bought 47 per cent of the company’s shares owned by local investors and 17 per cent owned by Fastjet Plc, becoming the majority shareholder and owner of the unit.
“We are now an independent Tanzanian unit and are looking for strategic investors so as to continue to expand within the country,” said Lucy Mbogoro, the firm’s public relations and marketing executive.
The parent firm, Fastjet Plc, has struggled to raise sufficient funding from its shareholders in the past year, having successfully raised $28 million in September last year out of the $44 million it had targeted in fresh capital, as its shareholders became increasingly reluctant to invest in the business.
The airline has gone through financial instability, having tapped shareholders for $10 million in July to fund working capital for the current operational period, against its operational costs that ran to $25.8 million in the first six months of this year.
By the end of September, its cash reserves stood at $4.2 million, with $2.8 million held inside Zimbabwe.
The remaining $1.4 million was external hard currency within the group, which it said would not be enough to continue operating the business into the fourth quarter of this year.