To stay afloat, low cost African airline, fastjet (The Group), has proposed to dispose of its Zimbabwean unit to its major shareholder Solenta Aviation Holdings Limited and a Zimbabwe based investor consortium.
The Group has been struggling to stay afloat and continues to be loss making with management expecting a loss after tax of US$7 million to US$8 million for the full year 2019 (2018: loss of US$65 million).
The Board expects further funding will be required by the end of February 2020 to enable the Group to continue operating in its current form, hence the need to capital raise and restructure.
The Zimbabwe unit will be offloaded for US$8 million and the funds will be used to pay off the Group’s liabilities of US$5,4 million as well as funding future aircraft capital expenditure amounting to US$3,2 million.
The balance of the required funding will come from the Zimbabwe based investor consortium.
There is, however, an option for the (Group) to buy back the Zimbabwe business in the next 3 or so years.
In addition, the Group would be granted an option to buy back its shareholding in fastjet Zimbabwe on the same divestment economics to which it would be sold, 3 to 5 years after the effective date of the sale, the Group said in a statement released this week.
The proposed sale will not affect the presence of the airline in Zimbabwe as the new owners, Solenta Aviation Holdings and the local Investor Consortium, will contract the group to continue providing the fastjet brand and airline management services.
Upon completion of the restructuring, the Group would then consist of the FedAir business, the fastjet Brand and fastjet Africa (which incorporates the fastjet Central Systems business unit) and which also owns fastjet Mozambique.
“The Group would be contracted by fastjet Zimbabwe to continue providing the fastjet brand and airline management services,” reads the statement.
The Group however cautioned that the proposed sale is not a done deal.
“While initial discussions with the Investor Consortium and the Group’s major shareholders have been positive about the restructuring proposal, discussions are ongoing and there can be no guarantee of a successful outcome,” reads the statement.
Zimbabwe remains viable for the airline’s operations and “increased its year on year revenue despite the difficult trading conditions following the introduction of a new currency which effectively devalued the existing currency by up to 15 times its previous value at official rates and has pushed inflation rates to above 200 percent”.