Fastjet chairman Colin Child has resigned from his post as the African airline prepares to raise more capital next year due to additional costs associated with its restructuring plan.
In a trading update, the African carrier says: “Having led the fund raising exercise in July this year, Colin believes that it would not be appropriate for him to continue in this role given the company is initiating, sooner than originally expected, a further fund raising exercise”. The carrier is planning a fresh capital raising effort in the first quarter of 2017.
Chief executive Nico Bezuidenhout is to assume the role of interim chairman pending the appointment of a new non-executive chairman in due course, Fastjet says.
Fastjet shareholder Stelios Haji-Ioannou has been a vocal critic of Child and urged fellow shareholders to oust him as chairman at the Fastjet general meeting on 28 June.
Child was acting chief executive between March and June following the departure of Ed Winter, before stepping aside following the appointment of Bezuidenhout.
The budget airline says that despite making good progress in its stabilisation plan, higher costs – particularly the cost and terms associated with returning leased aircraft – has proved “more onerous than previously expected” and have “placed greater strain on available cash-resources” requiring it to raise new capital in the markets.
The airline last initiated a capital raising exercise in July when it succeeded in raising £15 million ($ 19.5 million) from placement of new shares, but an open offer pursued as part of the same capital-raising effort fell far short of its £4.2 million target.
Fastjet says that during the first quarter of 2017 it expects to achieve a 25% reduction in fixed operating cost and overheads year-on-year and cut its variable operating costs by approximately 35% to some $ 8 million. The carrier predicts it will break even by the fourth quarter of next year.
“I am confident that, with the necessary capital, the company can break even by Q4 2017, and be well-positioned to pursue sustainable growth and value-creation for shareholders going forward,” says Bezuidenhout.
Fastjet says “material progress” has been made in its fleet reorganisation, with two-thirds of its Airbus A319 fleet have now been removed from its fleet and says its first wet-leased Embraer 190 aircraft was introduced in Tanzania during October 2016.
It expects to have moved its head office from London to Johannesburg to be “substantially completed” by March 2017 leading to what it predicts will be a 35% cost saving.
The carrier says it also plans organisational restructuring of its operations in Zimbabwe and Tanzania which will include the “substantial reduction in the size of our expatriate workforce in these countries and a greater reliance on local talent”.
Fastjet says it will suspend flights between Johannesburg and Victoria Falls from December as part of its network rationalisation. Frequencies between Harare, and Johannesburg are being increased.
“The remaining routes within Zimbabwe and Tanzania, and between these countries and South Africa, are all projected to positively contribute to fixed cost during December 2016 and will continue to be closely monitored thereafter,” the carrier says.