Page 33 - World Airnews Magazine January 2020 Edition

AIRLINES NEWS

FASTJET EMBRAER E145 TIPS TO MITIGATE

By Victoria Moores
INSURANCE RATE

HIKES

usiness aircraft operators are seeing sharp hikes to their
frican LCC fast jet needs to Binsurance premiums when it comes ti me to renew their
Arestructure by February 2020, coverage or insure a new aircraft.

if it is to continue as a going concern, However, there are steps they can take to minimise those in-
with the disposal of fast jet Zimbabwe creases.
forming part of its survival plan. “The insurance market has bottomed out just as we’re seeing

“The group will have sufficient re- a skyrocketing number of catastrophic loss claims,” said Joseph

sources to meet its operational needs Braunstein, managing director and general aviation practice leader

until February 2020,” fast jet CFO Kris at insurance broker Marsh USA. “
Jacana said in a recent statement. Underwriters are now pushing sizable increases because they
“However, the headroom of available must remain viable.”
cash resources is minimal, and the pro- That said, there are measures operators can take to find the right

jections are very sensitive to any as- insurer and combat higher premiums.

sumptions not being met. If the group “Invite your underwriter to your facility and instil in them your

is unable to carry out the restructuring flight department’s safety culture,” Mike Nichols, CAM, CAE, NBAA

proposal by the end of February 2020, senior vice president of strategy and innovation recommended.

it would be unable to continue trading “Highlight your safety culture, compliance with IS-BAO, safety

as a going concern.” age its key intellectual property of its management systems and your training proficiency, including

The company is now in active equity and FedAir business, the fastjet brand and brand and airline management solutions recurrent and additional training.

restructuring discussions with its major fastjet Africa (which incorporates the and invest in viable, already established “I’m amazed to hear about companies that don’t take any steps
shareholders, which have responded posi- fastjet Central Systems business unit) airlines where it can.” to tell their safety story, or even fill out their insurance company’s

tively to the proposals. and which also owns fastjet Mozam- Over the 10 months to Oct. 31, 2019 questionnaire, and are then surprised to see their premiums sky-

bique. The group would be contracted
Fast jet originally launched with a by fastjet Zimbabwe to continue provid- fastjet’s revenue rose by 20.5% to (US) rocket,” he continued.

Tanzanian airline in November 2012. The ing the fastjet brand and airline-man- $34.1 million. The company also made “sig- “Now more than ever, operators need to sell themselves as a
group previously had airlines in several agement services,” fastjet said. nificant financial and operational improve- manageable risk to their insurers.”

African countries, but this presence has This would turn the group into a “cap- ments,” which are expected to cut full-year Braunstein noted operators should also plan for a lengthy pro-
since been slimmed down to Zimbabwe net losses to (US) $7-$8 million, narrowed cess.
(fast jet Zimbabwe) and South Africa ital-light” business. Revenues would be from (US) $65 million in 2018.
(Fed Air). generated by the company operating Fastjet Zimbabwe’s revenues also rose “We used to start the renewals process around 120 days prior
as a “franchise house,” comprising the

The most recent airline to suspend fastjet brand and airline-management despite difficult trading conditions, after to expiration, but now those conversations begin as long as six

operations, on Oct. 26, was fastjet Mo- services. the Reserve Bank of Zimbabwe introduced months before,” he said. “

zambique. “The group’s strategy is to focus on a new currency which devalued the existing This can’t be a rushed proposition; be extremely detailed and

One option is to sell fastjet Zimbabwe to franchise and providing airline manage- currency by up to 15 times and pushed thorough with the information you present.” Q

Solenta Aviation Holdings and a consortium ment solutions to additional airlines in inflation above 200%.
of local Zimbabwean investors, raising Africa that are independently owned, FedAir’s operations are “resilient” and

approximately (US) $8 million. Solenta Avi- enhancing its overall revenues from expected to be profitable for the year,

ation Holdings already owns around 60% of these. Additionally, the group would aim although this stability has been offset by

fastjet Group. to only own airlines once they were cash continued volatility and uncertainty in

“The disposal would also relieve the generative and profitable, [thus] avoid- Zimbabwe.
group of c. $5.4 million of current liabilities ing the initial costs and significant cash Fastjet also clarified that its former

and c. $3.2 million of future aircraft capital losses through the airline start-up phase Tanzanian airline, Fastjet Airlines, which
expenditure, which will be raised and fund- and from operating in Africa’s some- was recently placed into liquidation was no

ed by the new investor consortium directly. times uncertain trading environment,” longer part of the group.

In addition, the group would be granted Jaganah said. Fastjet Air TZ, which owned 49% of fastjet

an option to buy back its shareholding in Fastjet CEO Mark Hurst said, “The Airlines Ltd, was sold in November 2018.
fastjet Zimbabwe on the same divestment disposal, if agreed, approved and imple- “For clarity, this liquidation order does

economics to which it would be sold, three mented, would be expected to de-risk not relate to the company or group itself

to five years after the effective date of the the significant uncertainty and cash and is restricted to divested fastjet Air-

sale,” Jaganah said. drain that shareholders have historically lines,” Jaganah said.
Funds generated by the disposal suffered and allow the group to continue As of Nov 2019, the group as a whole had
would be used to settle group liabilities operating under a more stabilized and cash reserves of (US) $3 million, $400,000
and to provide working capital into simpler business model. This revised less than the same time the previous year.

fiscal 2021. strategy allows the group the oppor- (See story on page 31) Q
“Upon completion of the restructur- tunity to create a single fastjet brand Article courtesy: https://atwonline.com/

ing, the group would then consist of the throughout key markets in Africa lever- airlines/fastjet-restructure-february-2020
World Airnews | January 2020 World Airnews | January 2020
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