Johannesburg-based Solenta Aviation Holdings is to acquire 28% of African low-cost carrier (LCC) fastjet as part of a $48 million equity deal, which is expected to be finalized Jan. 24.
Under the agreement, which is subject to fastjet shareholder approval Jan. 23, Solenta will receive 95.6 million fastjet shares, worth $19.2 million, and two board nominations. In return, Solenta will provide fastjet with three wet-leased aircraft and other services over the next five years.
Solenta operates a fleet of 49 aircraft. It is a commercial aviation group that holds five African air operator’s certificates (AOCs) and has strategic alliances, or AOCs pending, in an additional seven African countries.
Fastjet will list a total of 239,082,993 shares on the London Stock Exchange Jan. 24, raising $19.2 million from the Solenta agreement and $28.8 million from other related transactions.
“Our agreement with Solenta represents a good operational and strategic fit. It provides fastjet with access to fleet and related services which, together with the funds raised through our proposed placing, will allow us to successfully implement the final stages of our stabilization plan,” fastjet’s new CEO and interim chairman Nico Bezuidenhout said in a Jan. 5 stock market disclosure.
Fastjet launched operations in Tanzania in November 2012 and has been trying to establish itself as a pan-African LCC. However, the group’s strategy has progressed more slowly than anticipated because of regulatory hurdles and shifting demand in the African market.
In late 2016, fastjet announced a stabilization plan, which will see it transition from 145-seat Airbus A319s to Embraer E190s. This will initially be done through short-term wet leases, before switching to dry leases at the start of the second half of 2017. Solenta has experience working with Embraer aircraft and securing local regulatory approvals for the Brazilian aircraft, so the partnership is expected to help the fleet transition.
Fastjet has also come under shareholder pressure to cut its cost base. The LCC is rationalizing the network and will relocate its headquarters from London to Johannesburg by March 2017. These measures are expected to cut $8 million from the group’s first quarter 2017 costs.
“We have made good progress with the plan and the near-term priority continues to be to fully stabilize the business and to reach cash flow breakeven by the fourth quarter of this year. As well as helping us to achieve this objective, the fundraising and Solenta agreement will also provide the platform from which to flexibly and cost-effectively pursue fastjet’s medium- to long-term objective of becoming the first truly pan-African, low-cost airline,” Bezuidenhout said.