Fly540 now accuses Fastjet of breaching rules in licence row

In an ongoing tussle over a licence to run a low-cost airline locally, Fly540 Kenya has accused its sister company, FastJet, of breaching contract by taking their dispute to an English court of law.

In an interview yesterday, Fly540 Kenya chief executive, Mr Don Smith, said that the Share Purchase Agreement (SPA) between the two firms prohibited either of the entities from going directly to the courts until other mediation and arbitration efforts have been exhausted.

“The agreement clearly states that we have to try alternative dispute resolution channels. Their actions are therefore in breach,” said Mr Smith.

Earlier this month, London-listed budget airline, FastJet, initiated proceedings with the High Court of Justice in England seeking an end to a dispute with Fly540 Kenya over an alleged Sh589.86 million ($6.78 million) debt.

However, documentary evidence seen by the Saturday Nation indicates that last month, FastJet tried to engage Fly540 in mediation.

But the planned talks did not bear fruit after the two companies failed to agree on an appropriate date for the mediation. While FastJet, through its solicitors, had scheduled the mediation in early March, Mr Smith rejected the plan on the grounds that he could not abandon his business amid election uncertainty in the country.

“Don Smith failed to appear following initial calls to mediation and as such, FastJet has brought the matter to the High Court. As this is now a legal matter, we will not be commenting further,” said FastJet in a statement.

The dispute emanates from a June 2012 transaction in which the London-listed carrier FastJet acquired a controlling stake of the Fly540 business in Kenya, Tanzania, Angola and Ghana.

Following the transaction, FastJet had planned to establish a Pan-African low-cost carrier modeled on Europe’s Easy Jet.

But the transfer of the Kenyan outfit hit a snag in December last year as Mr Smith wrote to FastJet demanding payment of an alleged debt of Sh589.86 million ($6.78 million).

On its part, FastJet has maintained that it cleared all dues owed to Mr Smith and Fly540 Kenya last year.

“The company has paid Mr Smith a fair and reasonable price for his controlling interest in Fly540 Kenya and we expect to receive in full what we have paid for,” Fastjet chairman David Lenigas said in a statement last week.

The disagreement has frustrated FastJet’s plans to expand and establish its brand in Africa. However, the company last week said it was planning to expand its capacity by 50 per cent.