FastJet licensing dispute with local partner takes new twist

In a statement, FastJet chief executive officer Ed Winter said they had agreed with Five Forty to resolve a dispute that would see withdrawals of court cases against each other.

What you need to know:

  • FastJet, had begun operations in Tanzania in November last year with a view to enter the Kenyan market, a move that is likely to stir competition in the low cost aviation market in the East African region.

A licensing dispute that has held back a European low cost airline from operating in the Kenyan market has taken a new turn with the fighting parties said to have agreed to settle the matter.  

Low cost carrier, FastJet, which had run into a licensing dispute with its Kenyan partner, Five Forty Aviation that operates Fly540 yesterday, said it had entered into a memorandum of understanding with the latter’s chief executive Don Smith to resolve the disputes, allowing it to operate in Kenya.

In a statement, FastJet chief executive officer Ed Winter said the two airlines had agreed to resolve a dispute that would see withdrawals of court cases against each other.

Competition tightening

“Don Smith remains the CEO of the Kenyan business and we are pleased to have him as part of the FastJet/Fly540 team,” Mr Winter said in the statement.

FastJet, had begun operations in Tanzania in November last year with a view to enter the Kenyan market, a move that is likely to stir competition in the low cost aviation market in the East African region.

However, FastJet’s bid to start operations in Kenya through Fly540 had run into a storm over a licensing row and alleged unpaid debts to Don Smith.

Attempts to reach Mr Don Smith to shed more light on the matter were futile as Nation could not reach him on his cell phone.

In December last year, Mr Smith wrote to FastJet demanding the payment of an alleged debt of Sh589.86 million ($6.78 million) following a June 2012 transaction in which the budget airline acquired a controlling stake over the Fly540 business in the region.

Deal Obligations

FastJet, on the other hand, claimed it had paid Mr Smith a fair and reasonable price for his controlling interest in Fly540 Kenya.

The dispute delayed the transfer of necessary documents by Fly540 to FastJet to complete the transaction as Mr Smith noted that all obligations of the deal had not been fulfilled, which included the payment of $6.78 million (about Sh584 million) “of intra-company debt as well as the issuance of my shares remain outstanding.”

Meanwhile, Kenya Airways, which is to launch a low cost carrier this year, saw its total passengers stand at 828,032 in the fourth quarter ended March 31, which was at par within the same period last year according to a statement from the airline. 

The capacity in the East African, Middle East and Far East regions grew strongly at 34.9 per cent and 18.9 per cent in the period under review.

Europe, however, recorded the highest reduction due to the economic challenges facing the Euro-Zone economies that necessitated cutbacks in capacity offered including the closure of the Rome route. Passenger uplift to Europe stood at 83,506, compared to last year’s 113,184.