FastJet ties up with Jetlink to launch low-cost carrier

Jetlink has inked an agreement with budget carrier FastJet to launch a low-cost carrier amid uncertainty over the ownership and role of Fly540 in the joint venture.

The budget carrier Monday said the new airline will be used as a platform to launch the FastJet brand in Kenya after receiving approvals from the boards of two firms and licences from the civil aviation authority.

The proposed airline will be a separate entity from the grounded Jetlink, raising the possibility that it will rival Fly540, where Rubicon that owns the FastJet brand has a significant shareholding.

“A joint venture between FastJet and Jetlink will facilitate the launch of the FastJet brand in Kenya within the next few months with immediate access to domestic and regional destinations,” said FastJet’s chief executive Ed Winters.

Early this month Jetlink announced it would resume operations by March with the help of new equity investors.

The airline suspended services in November due to cash flow challenges as it was unable to access about $2 million (Sh170 million) worth of ticket sales held in bank accounts in South Sudan.

Captain Elly Aluvale, Jetlink’s chief executive, Monday said the new joint venture will be separate from the troubled airline.

“This is a joint venture that will go towards setting up a low cost arm of Jetlink, something similar to what Kenya Airways is doing with Jambo Jet,” added Mr Aluvale on Monday.

Kenya Airways has received approval to launch its budget arm, JamboJet, which will ride on low fares due to its leaner cost structure compared to those of international airlines.

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On June 13, Lonrho announced it would transfer its 49 per cent stake to Rubicon in a deal worth Sh7.2 billion.

The new owners said they will revamp Fly540 and remodel its business into a low-cost African airline, which will employ the business model adopted by EasyJet, the second largest low-cost carrier in the UK after RyanAir.

Now, Fastjet seems to be pursuing a different path to creating a low cost regional carrier as it noted that there was not dispute in Fly540 over the settlement of the purchase price.

The 51 per cent stake in Fly540 was held by Don Smith through an investment vehicle christened 530 investments. Mr Smith is the CEO of Fly540.

Rubicon had announced last year that there was an agreement to acquire interest in a large portion of the remaining 51 per cent stake from 530 investments at a price of $2.25 million (Sh185 million).

But Mr Smith told the Business Daily earlier that he remains the majority shareholder if the Kenyan wing of Fly540 after selling the Tanzanian unit to Rubicon. He claimed he is owed money following the sale of the Tanzanian subsidiary.

But on Monday Fastjet maintained that they have settled Mr Smith’s dues and that the purchase of Five Forty Aviation Limited.

“Don Smith and his partners have been paid all amounts due to them, a total sum of US$6.75m,” said Fastjet on Monday.

“There has never been any agreement that Lonrho Aviation would pay Mr Smith a further sum of US$7m.  The purchase of Five Forty Aviation Limited has been fully consummated.”