Fastjet plc (LON:FJET) Chief Executive Officer Ed Winter and Chief Financial Officer Nick Caine caught up with DirectorsTalk for an exclusive interview to discuss their year-end results for 2014 and their plans for expansion
Q1: You released your year-end results for 2014 this morning, how did the results fit into plans for expansion?
A1: I think it gives us great confidence to really move forward with expansion plans. Tanzania year on year shows real improvement in margin, passenger numbers, all the right metrics and now we’ve got 3 aircraft pretty well fully utilised so with the current passenger demands and we’re seeing that massive increase in passenger numbers flowing through into this year so there’s clearly plenty of opportunity to continue increasing frequency on our domestic routes. We’re also confident in getting more international routes operating very soon, including routes to Kenya.
Q2: Looking through the results, there are a lot of non-cash items in group loss, does this mean that the balance sheet has been cleared or is there still more to come?
A2: Yes, it absolutely does. Of the total losses we’re declaring of $72 million, over half of those actually relate to a combination of non-cash acceptable items and in tangible asset impairments that fundamentally clean up the balance sheet. So when we now look at the balance sheet, it reflects the shape and size of the continuing business. Other than the items shown as Held for Sale that relate to the legacy operations in Ghana and Angola, the assets and the liabilities as I say are purely the Fastjet business only. In short, there are no more future impairments expected.
Q3: I notice you quoted 20% reduction in Cost per ASK, what does this mean for the company?
A3: Basically, it reflects increased utilisation of our assets and also general efficiency of the business as you move from start-up phase into a more mature phase. So as we add more aircraft, the fourth is already on the way, we’ll see that unit cost continue to fall and that allows Tanzania to turn to profit on an annual basis and of course as we start Zambia and Zimbabwe, many of the costs benefits of achieving Tanzania then flows through to those operations so they become profitable much faster than was the case in Tanzania.
Q4: And finally, you’ve said you’ll be adding an extra plane to the fleet in quarter 3 this year and that you have the funding in place to build the fleet up to 34 aircraft by 2018. I know you’ve got to get all the payment in place first, how do you envisage this happening? Will you have to set a target for the year or as and when the payments are approved?
A4: We’ll build up the fleet dependant on the granting of CAPEX rights across those countries because we’re targeting six countries; Kenya, Tanzania, Uganda, Zambia, Zimbabwe and South Africa, and over that period of time dependant on passenger demand as we’re using the aeroplanes, we feel that there’s a least the capacity to do that. 34 aircraft by 2018 would equate to about 10 million seats occupied, that means 2.5 million people travelling twice a year, so doing 2 return journeys. So add the population of 210 million across those countries, that’s pretty doable. We also think that having worked very carefully to calculate what we think the potential reasonable domestic market will be by 2018 in those six countries, that’ll represent somewhere between 10-15% of that aviation market on reasonable domestic routes. So it’s very doable during that period.
