A new budget airline backed by easyJet founder Stelios Haji-Ioannou
will soon take to the African skies, promising to bring low-cost flights
to millions of people in the continent.
Dubbed Fastjet,
the no-frills carrier is expected to launch in three to four months,
aiming to cash in on Africa's robust economic growth and a growing
appetite for travel by its burgeoning middle class.
The move comes after Haji-Ioannou's easyGroup teamed up earlier this month with pan-African conglomerate Lonrho
to create the low-cost carrier. Lonhro, owner of budget airline Fly540,
has agreed to sell its aviation business to investment firm Rubicon
Diversified Investments, in which easyGroup will hold a 5% stake.
The new business will
start operations using Lonrho existing network in Ghana, Kenya, Tanzania
and Angola, before expanding to more markets in the future.
"These four countries are
currently experiencing great GDP growth, along with oil and gas
discoveries and developments," says Ed Winter, chief executive of
Fastjet.
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STORY HIGHLIGHTS
- EasyJet founder Stelios Haji-Ioannou has joined forces with Lonhro to launch Fastjet
- The low-cost airline will operate from Ghana, Kenya, Tanzania and Angola
- Low prices will democratize air travel in Africa, say Fastjet executives
- Challenges include airport infrastructure
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"We believe that the time
is absolutely right to change Fly540 into a much bigger airline based
on the low-cost model which has been successful in every other part of
the world," adds Winter, who is easyJet's former chief operating
officer.
The business, which will
still be majority-owned by Lonrho, has set a target of carrying around
12 million passengers per year, "which creates an airline of roughly 40
aircraft," according to Richard Blakesley, Fastjet's finance director.
The low-cost carrier
expects to offer average fares of $70-80 before tax, which could fall to
as much as $15-20 when booked early.
"That price will absolutely democratize air travel, totally changing the way people are traveling in Africa," says Winter.
Fastjet executives say
they hope to tap Africa's rather underdeveloped aviation network,
offering an affordable alternative in a transport environment largely
dominated by difficult terrains, long bus journeys and poor
infrastructure.
Haji-Ioannou, who set up easyJet in the mid-1990s, has described Africa as "the aviation industry's last frontier."
"Past experience shows
by halving fares, a successful low-cost carrier can encourage those
people, who have never previously traveled by air, to fly. For Africa,
with its densely populated cities separated by great distances -- this
means a potential new market of millions," he said after the reverse
takeover by Lonhro.
In 2011, low-cost
carriers occupied 9% of the African market, suggesting that there is a
large potential for further development and growth, says aviation expert
Linden Birns.
He notes, however, that the big challenge for airlines is breaking into cross-border flights and launching intra-African routes.
"At the moment access to
markets on a transnational basis is governed by a set of bilateral air
transport agreements," says Birns, founder of South Africa-based
aviation consultancy Plane Talking.
"Under those agreements,
governments stipulate who's allowed to fly and how many flights. That
really keeps a lid on things -- if you can break through those barriers
and introduce competition then we should see some pretty rapid growth
happening in the market."
Aircraft manufacturer Airbus has forecast
Africa traffic to expand by about 6.5% per annum between 2011-2020 and
by 4.9% between 2021-2030, for a 20-year growth rate of 5.7%. This
compares with a 4.8% increase in demand on a worldwide basis over the
next 20 years.
"It's no secret that
Africa represents a massively untapped market," says Birns. "If we look
at where growth is happening in the world, Africa is certainly up
there."
Birns says that as
Africa's cities get more populated and as demand for business is
growing, the expansion of the low-cost model should revolutionize the
continent's air transport in the same way that it did in North America,
Europe and now in Asia.
"More people will be
able to trade, more people will be able to do their tourism and it
should be a good economic driver," he says.
Fastjet's foray into the
African market comes amid a tumultuous time for aviation industry in
the continent -- earlier this month, a plane crash in Lagos, Nigeria, killed all 153 people aboard.
Winter says Fastjet will raise the bar on safety and security, operating "as though it was an European airline."
"There's no reason why
Africans shouldn't be just as safe and secure as in an European airline
and we will follow those sort of procedures," he says. "Now, that adds a
bit cost to our operation but to my mind all of those costs are
actually worthwhile to provide a safe and secure airline."
Looking ahead, Winter
says the biggest challenge for Fastjet is dealing with lack of airport
infrastructure, as well as high taxes imposed by governments and
rocketing fuel duties.
"What we're hoping is
that governments will realize that by allowing these tax levels to come
down to more normal levels, we will be able to do most markets and their
total revenue will actually increase," he says.
But despite the
challenges, Winter says he is "incredibly excited" about the venture,
saying that there isn't a better time to enter the African market.
"Five years ago it just
wasn't that level of GDP growth, the spread of wealth amongst the
population and the level of investment," he says, "Whereas now I think
all those factors come to play and now it's exactly the right time to do
this."
Source: CNN
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