African LCC fastjet has raised $10 million from investors, staving off imminent financial collapse after the airline warned last week that it might not survive without a further round of equity fundraising.
Fastjet said it was in talks with shareholders, but if unsuccessful the company might not survive as a going concern. At one point in June, cash reserves had shrunk to $3.3 million, of which $1.75 million was restricted in Zimbabwe.
However, on June 29 the LCC said it had placed more than 66 million new ordinary shares worth $7 million, while the largest existing shareholder, South Africa’s Solenta Aviation Holdings, had agreed to subscribe for a further $3 million-worth of shares.
Solenta Aviation CEO Nick Hurst will join the fastjet board and will “work closely with CEO Nico Bezuidenhout on an ongoing basis,” the company said. Hurst will also be responsible for fastjet’s operations in Mozambique and Zimbabwe.
The funds raised are expected to provide fastjet with sufficient working capital for the rest of 2018. Half of the net proceeds will be used to support its operations in Mozambiqueand Zimbabwe, together with the repayment of loans, while the balance will be used to support operations in Tanzania and for preparations for the launch of services in South Africa.
Fastjet has a brand license agreement with South Africa’s Federal Airlines, which will give the LCC access to a South African air operator’s certificate; in-country services are expected to start by early 2019.
The successful fundraising allowed fastjet to release its annual financial figures. These showed that it halved its net losses to $24.5 million, compared to $49.7 million in 2016.
Load factor jumped 17% to 71%, while costs were cut by 48% to $70.7 million and revenue per seat rose 30% to $60.9.
The company said 2017 had been a year of stabilization, having transitioned from its Airbus A319s to smaller aircraft—two Embraer E190 and three E145 jets. Additionally, the airline plans to introduce three ATR 72 turboprops during September 2018. It rationalized its network while moving to the new fleet.
Fastjet also pointed to other positive factors such as its “strategic and operational partnership” with Solenta and the purchase of the fastjet brand from UK-based easyGroup, whose founder, easyJet creator Stelios Haji-Ioannou, had frequently clashedwith fastjet’s previous management team.