Fastjet majority owner wants directors fired

Tuesday March 1 2016

Ebola outbreak and Kenya Airways’ plan to turn to low-cost carriers have also been cited as reasons contributing to the low consumption of jet fuel. PHOTO | FILE

EasyJet entrepreneur Sir Stelios Haji-Ioannou has used his position as a major shareholder of African budget carrier Fastjet to demand that two key directors be sacked. PHOTO | FILE 

By PAUL REDFERN
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EasyJet founder Sir Stelios Haji-Ioannou is pushing for the sacking of chief executive and directors of Fastjet in which he is a majority shareholder.

The airline, which has recently started to fly into Nairobi, announced in December that it would miss revenue forecasts for both 2015 and 2016.

The airline raised £50m from investors last April to help meet its ambitions to become a pan-African carrier. However, it recorded a $44.2m pre-tax loss from continuing operations in 2014 and now Sir Stelios has demanded the airline cut back its cost base and sack Fastjet’s chief executive, Ed Winter, and another director, Krista Bates, from the main board.

The EasyJet founder is particularly critical of the costs incurred through having a London Gatwick operation even though the airline does not fly out of the UK.

Sir Stelios told the Guardian newspaper: “This is not only a high cost location, when revenues are reported in local Tanzanian currency, but is also 4,750 miles away from Tanzania where the main operations and customers of Fastjet are located.”

“Ed Winter has refused to diverge from a completely flawed strategy of locating all top management and central functions at Gatwick Airport – near his own home,” the tycoon claimed.

GETTING OUT OF HAND

He added that Fastjet was making unrealistic revenue forecasts for a fleet of six aircraft and that its costs were getting out of hand.

“The company has a ridiculously high cost base ... (Mr) Winter has burnt some £80m in the last 3 years. We believe the company will run out of cash sometime in 2016. We now have about six months left to steady this ship. Time is of the essence.”

Fastjet has dismissed the comments and said the airline is on target to deliver a small profit of $1.4m this year.

A spokesman for Fastjet told the Telegraph newspaper: “In line with its stated intentions, proceeds from the company’s fundraising in April 2015 have been used to fund expansion and the growth of its operations.

“This is demonstrated by the launch of the airline’s second base in Zimbabwe, the launch of multiple new routes since the fundraising and the recent commencement of flights to Kenya. Fastjet also, as promised, acquired its first aircraft with the purchase of one Airbus A319."

Mr Winter announced last month that he would step down as chief executive, pending a successor being found, but a spokesman for Haji-Ioannou, who owns a 12 per cent stake and helped set up the Tanzania-based airline said it was time for a “clean break” now saying he has "lost faith" in the management team.

Sir Stelios has history in his relationship with airlines and has been a longstanding critic of management at the UK-based EasyJet airline he founded.

In a letter to Fastjet’s chairman Sir Stelios, a 12pc shareholder in the company, called for an extraordinary general meeting to remove Ed Winter, its boss, and Krista Bates, the airline’s general counsel, from the board with immediate effect. The entrepreneur called for the EGM in a letter to Colin Child, Fastjet’s new chairman.

Fastjet launched its operations in late 2012 with domestic flights in Tanzania, but shares plunged to a record low after a profit warning in December.
This has been caused by political uncertainty in the East African region caused by presidential elections and sharp depreciations in African currencies.