Fastjet warns of more turbulence, shares plunge

LONDON: Fastjet Plc, an African budget airline, warned its results for the year would be well below market expectations, adding further turbulence as it second-largest investor seeks to oust CEO Ed Winter.
The Tanzania-based airline’s shares, listed in London, fell as much as 45 percent to a record low of 36.04 pence on Monday before recovering some lost ground.
Fastjet said it no longer expected to be cash flow positive in 2016, citing challenging conditions in the domestic aviation market.
Operating from Tanzania and Zimbabwe, Fastjet has offered “no frills” flights to undercut larger carriers, seeking to copy the discount model pioneered by European airlines such as easyJet and Ryanair.
However, the airline has struggled in the face of tough conditions in Tanzania, its home market where most of its fleet is deployed.
Expansion in into Zimbabwe last October has added to challenges, causing Fastjet to issue two warnings on 2015 revenue and announce plans to cut capacity and costs.
Liberum analyst Gerald Khoo said the Tanzanian economy has stagnated for longer than expected following an election late last year.
“We now forecast a $20 million loss in 2016, compared with a $1.4 million profit previously,” Khoo wrote in a client note, putting his target price and rating on the company under review.
The airline did not detail its results warning.
Last week, Stelios Haji-Ioannou, the easyJet founder whose private investment vehicle easyGroup holds 12 percent of Fastjet, said it was seeking a shareholder meeting to oust the CEO.
Haji-Ioannou said costs were too high for an airline with six planes.