Ousted Fastjet CEO says currency slide to blame for Africa woes

Bloomberg

Fastjet Plc Chief Executive Officer Ed Winter, who is poised to leave the African discount airline after clashing with investor Stelios Haji-Ioannou over mounting losses, said he still thinks the continent is on the cusp of a transformation into a viable aviation market.
Without an unexpected slump in currencies spanning the South African rand to the Kenyan schilling, Fastjet would be making money and further down the road with its plan to become the first pan-African low-cost airline, Winter said in an interview on Friday, his last day at the company.
“You’d have a very different and far more optimistic situation,” the executive said. “I just think perhaps that’s delayed for a year as the economy improves. But you can’t say our model isn’t working. If the pound and euro had declined 30 percent then European airlines would be experiencing the same problems.”
Winter’s assessment of Fastjet, whose cash reserves had shrunk to $20 million by the end of February, contrasts with that of 13 percent shareholder Stelios.
The EasyJet Plc founder, who goes by his first name, attacked Fastjet for failing to publish traffic figures since December, saying it could be headed for collapse. The stock fell as much as 34 percent following Friday’s opening.
FastJet has its main base in Tanzania, where the shilling weakened 25 percent against the U.S. dollar last year, with the Kenyan shilling falling 13 percent, the rand 33 percent and the Malawian kwacha 44 percent.
That’s a major issue in the aviation industry, where receipts are commonly in local currencies and 90 percent of expenses are in dollars, Winter said. With 15 percent of the world’s population and 20 percent of its landmass but only 3 percent of the aviation market, Africa may be “a difficult place to do business,” but its potential “is absolutely there,” the executive said. The low-cost approach is also the only viable one, with state-backed carriers such as South African Airways and Kenya Airways Ltd. following the “wrong model” and suffering as a result of the government intervention, he said.
Fastjet is also making 30 percent of sales via smartphone “mobile money” bookings, a figure Winter says vindicates his view that technology will greatly aid African airlines. Other tickets are paid for in cash, with only a tiny number of people using the bankcards that account for almost all fares in Europe.
Winter said Dar es Salaam-Nairobi traffic, highlighted by Stelios as weak, will pick up once Fastjet adopts a more attractive timetable and that it had been important to get flights operating. The executive announced his resignation Monday, two weeks after the entrepreneur had criticized him for promising in January to go without giving a date.
“The emotion I have as I leave is that we have done a great job getting where we are,” Winter said. “We had expected to grow a little more, but we have figured out the economy and the market and we’ve shown that you can stimulate demand with a low-cost model.”