Twist in Sh660m Fastjet-Fly540 wrangle as licence is withdrawn

The debt-ownership row between FastJet and Fly540 Kenya has taken a new turn after the latter withdrew its licence that allowed the London-based budget carrier to carry out business in Africa.

In a statement on Wednesday, Five Forty Aviation, which owns the Fly540 brand, said that FastJet subsidiaries across the region must repaint their aircraft and remove branded merchandise from sales offices after failing to comply with conditions stipulated in the licence agreement.

Five Forty Aviation had January 24 written to FastJet subsidiaries in Angola, Ghana and Tanzania giving them a seven day notice comply with the licence agreement, part of which include the payment of Sh669.9 million in licensing fees.

The subsidiaries allegedly failed to meet the Tuesday deadline following which Five Forty Aviation withdrew its license.

“We had no choice but to take this action... we have not received safety reports for the past three months from FastJet’s Africa Operation,” said Fly540 Kenya chief executive Don Smith.

In a rejoinder, FastJet issued a statement declaring that neither Mr Smith nor Five Forty Aviation has the power to withdraw the licences.

“Five Forty Aviation is powerless to terminate purported brand licence agreements for any Fly540 operations... with regard to operations, it will have no impact on operations,” Fastjet chairman David Lenigas said.

FastJet was set up last year after Lonrho Aviation transferred 49 per cent of its ownership in Fly540 to London-listed firm Rubicon.

The company’s plan is to leverage on the Fly540 brand and market position in Kenya, Tanzania, Angola and Ghana to launch a budget carrier in Africa.

However, over the past few weeks, Fly540 Kenya has disputed the validity of the transaction, saying that Lonrho owed the company Sh591 million ($6.8 million).

The ownership dispute has stalled FastJet’s plans to enter the Kenyan market and revamp the Kenyan unit of Fly540.

Last week, the company signed a deal with Fly540 rival, Jetlink, that could give it an alternative route into the local market.

“We feel that Jetlink, which already has IOSA (an international safety standard) accreditation, is a far better Kenyan partner for Fastjet, given our standards of safety, security and reliability,” said FastJet yesterday.

The company has also stated that it will move against Fly540 Kenya chief executive Don Smith, to recover “previously undisclosed historic debts” that “have come to light post acquisition.”

The latest move by Mr Smith to go after FastJet’s business outside Kenya could further throw a wrench in the company’s long-term plans.