The London Stock Exchange (LSE)-listed Fastjet, has raised Sh6.9 billion ($75 million) to finance its expansion into Kenya and other African routes, stirring up a niche that has attracted players like Jambojet and Fly540.
The funds were raised after the company sold five billion shares on the LSE to investors at a discounted price of Sh1.36 each. The funds will be used to increase Fastjet’s fleet number and open-up new routes across the continent, its management has said.
“The net proceeds of the fundraising will be deployed in two key areas; expansion working capital and the acquisition of aircraft,” read an official statement on placing in part.
The statement added: “There is a working capital requirement to fund further expansion and the launch and growth of operations in Zambia, Zimbabwe, Kenya and South Africa. This will be sufficient to build a sizeable operation in each country.”
Currently, Fastjet which operates in Tanzania having entered the market in November 2012 - has three domestic and four international routes linking passengers from Dar es Salaam to Johannesburg, Harare, Entebbe and Lusaka.
The airline plans to acquire an Airbus A319 aircraft, which has a capacity of 124 passengers, in line with the plan to open new routes.
The aircraft will be the first additional plane, after the current fleet of three bought when the company was launched in Dar es Salaam.
“The current fleet of three aircraft is now almost fully utilised and growth opportunities will require increased numbers of aircraft over the remainder of 2015. This will enable fixed overhead costs to be further spread over a larger operation.”
The carrier is betting on the current expansion plans to improve profitability. Building on the success of the Tanzanian operation, Fastjet plans to roll out the model across the entire African continent, the company announced.
Its foray into Kenya is likely to change the competition landscape in a niche where players like Fly540 and Jambojet are yet to make a significant impact.
The company achieved its first profitable month of operations and sold its millionth seat in December last year. The profitability, the company said, was due to the demand of its services during the festive season and the low fuel prices.
“The key contributors to this were the maximisation of fleet capacity and improved revenue per passenger. Further contributors, on a smaller scale, were load factor -the number of passengers as a percentage of the number of available seats flown-and a reduction in aviation fuel cost.”
During the announcement of Fastjet’s expansion and growth plans, the company appointed Clive Carver as the intern chairman.