Fastjet's losses widen as it plans to cut costs and relocate

Africa-based budget airline Fastjet’s shares plummeted 17% on Tuesday morning as the company reported its losses widened in the first half.

For the six months ended 30 June, operating losses from continuing activities rose to $31m from $12.8m the same period last year. The loss from continuing activities before tax jumped to $31.26m from $9.8m.

Revenues increased slightly by about 4.8% to $33.1m, but reported a loss after tax of $15m, compared to $6.4m last year.

The loss for the period resulted in a significant operating cash outflow. The cash balance at the end of June was $3.8m, down from $71m in 2015.

Since June the company has raised about $20m before expenses through a share placing and open offer which resulted in the cash balance to be about $16.5m on 31 August.

Chief executive Nico Bezuidenhout, who was appointed in August after the previous incumbent was ousted by easyJet founder and major shareholder Sir Stelios Haji-Ioannou, said the first six months was a “very difficult and challenging time for Fastjet” as “adverse economic and trading conditions significantly impacted the company's financial results and passenger numbers”.

He added: "As a result, my focus since being appointed has been to undertake a fundamental review of all aspects of Fastjet's business model and operations. My immediate priority is to stabilise the business, reduce costs and ensure that we have the correct size of fleet, in terms of both number and size of aircraft.

"We are relocating Fastjet's head office from Gatwick to Johannesburg, our largest international destination, so as to both reduce costs and be much closer to our home markets.”

To cut costs the existing fleet of five A319 aircraft will be reduced to three and will be replaced by three smaller leased aircrafts, which is expected to reduce seat capacity and costs by about 15%.

The AIM listed company said there were a number of risks to its forecasts including achieving expected passenger numbers and yield, aviation fuel prices which are not currently hedged, adverse currency exchange rate movements, achieving the company’s stabilisation plan and to receive no cash from the liquidation of Fastjet Aviation.

The company said these matters “represent material uncertainties that may cast significant doubt upon the group's and the parent company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business”.

Shares in Fastjet were down 17.07% to 20.94p at 0956 BST.