TIDMFJET
RNS Number : 1115J
Fastjet PLC
07 April 2020
fastjet Plc
("fastjet", the "Company" or the "Group")
Trading Update, Impact of COVID-19, Capital Requirements and
Restructuring Proposal
7 April 2020
fastjet, the low-cost African airline, today provides an update
on forecast trading following announcements by the Government of
South Africa and the Government of Zimbabwe to effect lockdowns
regarding efforts to contain and control the rapid escalation of
COVID-19 in their respective countries.
South Africa began a country-wide lockdown on Thursday 26 March
2020 that will continue to midnight on Thursday 16 April 2020.
Zimbabwe started a country-wide lockdown on Monday 30 March 2020
that, at present, will continue to midnight on Sunday 19 April
2020. There is a risk that the respective Governments could further
extend both lockdowns; the fastjet executive management team is
closely monitoring this and the impact such an extension may have
on the scheduled restart date for flight operations. fastjet
Zimbabwe is currently planning to restart flight operations on
Tuesday 21 April 2020. Flight operations will commence on a reduced
flying programme, building up frequency and yields according to
passenger demand and the competitor landscape.
fastjet business and employee actions
During the lockdown period, all non-essential employees are on
paid annual leave, with those employees responsible for essential
critical tasks continuing to work from home. Once a week, selected
employees in Zimbabwe are performing essential aircraft maintenance
and flight activities on the grounded fleet to keep the aircraft
fully serviceable in accordance with required maintenance
preservation requirements.
All fastjet group employees have accepted a voluntary salary
reduction effective from 1 April 2020 of up to 30% depending on
their current salary scales, with the lowest earners affected the
least.
The monthly gross salary costs (before variable flight pay
allowances paid to cockpit and cabin crew) from April 2020 onwards
for the fastjet group (Zimbabwe, South Africa and UK) is
approximately US$ 200,000 per month.
fastjet Zimbabwe expects that the significantly reduced global
oil prices will help to cushion the financial impact of the
forecast lower passenger demand when operations restart. The April
2020 fuel price is 35% lower than it was in January 2020, at which
point fuel represented 23% of total operating costs.
At this current time, it remains difficult to accurately
forecast revenues for the months ahead and the resultant cash
generation; in light of this, the Board will continue to assess the
Company's going concern ability on an ongoing basis and, in
particular, from when operations restart.
fastjet Zimbabwe, Restructuring and Divestment Proposal
As announced on 12 March 2020, the Directors expected that the
Group would have sufficient resources to meet its operational needs
until the end of June 2020. This was prior to the worldwide
disruptions caused by COVID-19
To address future funding requirements, the Group is in ongoing
discussions with an investor consortium led and underwritten by
Solenta Aviation Holdings Limited and other local investors in
Zimbabwe (the "Investor Consortium"), in relation to the disposal
of the Company's holding in fastjet Zimbabwe (the "Disposal"), with
such Disposal subject to certain preconditions. The Directors had
expected to meet all pre-conditions by 31 March 2020 and further
that the transaction would be completed, subject to shareholder
approval, in April 2020.
Following the COVID-19 outbreak and country lockdowns in South
Africa and Zimbabwe, these timelines are no longer practically
achievable. Additionally, the shutdown of flights of fastjet
Zimbabwe will have a further impact on the overall fastjet Zimbabwe
business and obligations, as revenues have stopped whilst the fixed
costs continue.
The Group's executive management team therefore approached the
Investor Consortium to confirm its views on completing the Disposal
once the fastjet Zimbabwe business restarts flight operations. The
Investor Consortium confirmed that it remains committed to the
divestment proposal but has indicated that it would potentially
foresee modified terms needing to be discussed, negotiated and
agreed between it and the Company's Board. These discussions can
only begin when the impacts and timeline of the two countries'
shutdowns are better understood. The Investor Consortium indicated
that it would need to assess and understand the costs incurred
linked to the COVID-19 flight suspensions, recurring fixed costs
and, when flights do restart, the forward-looking passenger demands
which will then be more accurately understood.
Whilst the COVID-19 pandemic is a significant headwind to all
airlines worldwide, the fastjet Zimbabwe business model provides
the Company with several pillars of strength that will help support
trading and future operations while waiting for the Disposal.
fastjet Zimbabwe has fully paid off all of its Embraer EMB145
aircraft; it has a low and lean overall overhead cost base in
Zimbabwe; and additionally, fastjet Zimbabwe is receiving support
from the relevant authorities in Zimbabwe.
fastjet Zimbabwe's unflown forward ticket sales obligation was
US$ 616,476 as of 31 March 2020. This is much lower than
traditionally experienced and is due to the very late booking
patterns by passengers who are booking flights only 24-48 hours
before the actual travel date.
FedAir business and employee actions
Federal Airlines ("FedAir") provides shuttle and charter
services to the safari reserves and lodges in the Southern Africa
region. Its markets are predominately international tourists from
the USA, the UK and mainland European countries. All these
countries have been severely hit by the COVID-19 pandemic and the
associated international travel bans currently in force.
With the ongoing disruption experienced in international flights
and the tourism industry as a result of the COVID-19 pandemic,
FedAir has entered a restructuring process under section 189 of the
South African labour law requirements which will result in 55% of
its full-time employees being retrenched. The remaining employees
have either accepted a voluntary salary restructuring or a
reduction in salary of approximately 20% on a cost to company
basis. The FedAir company pension scheme will also be terminated
effective as at 1 April 2020 and thereafter all employees will
either choose to continue it directly themselves, place it into a
preservation fund or have it paid out.
The majority of FedAir employees are on paid leave for the month
of April 2020 whilst a few essential employees continue working
from home or operating freight charters regionally.
As a result, FedAir has seen a dramatic downturn in forward
ticket sales and reservations and the majority of passengers that
were booked have deferred their travel into Q4 2020 or the first
half of 2021. FedAir is not expecting significant shuttle or
charter bookings for at least the next six months and is
forecasting that the earliest they would see passengers returning
would be from December 2020 onwards and, for most of the bookings,
into 2021.
As a result of this situation, a significant portion of the 14
aircraft fleet (which were leased in on a per hour cost basis, some
with minimum monthly flight hour guarantees) has been terminated.
FedAir has retained the four aircraft which it owns, and that were
previously acquired with bank loans, and two third-party owned
B1900D type aircraft which will be leased into the foreseeable
future on a variable per hour basis, with no minimum flight hour
guarantees for the rest of 2020. FedAir is in discussions with its
aircraft financiers relating to the owned aircraft to suspend and
defer capital repayments on the aircraft loans until December 2020
due to the very low debt levels remaining on those aircraft.
FedAir has retained limited crew to operate these six aircraft,
which will be the core fleet retained for the remainder of
2020.
The lack of any material revenue from the FedAir traditional
shuttle and charter business will place significant strain on
FedAir's cashflow and resources. After the above significant FedAir
restructuring, which the Company together with the FedAir executive
leadership team believes is now the minimum required to protect the
core business without losing significant specialised skills, FedAir
would need additional cashflow of approximately US$ 1.0m by 31
December 2020. Options to raise the required capital to support the
FedAir business include securing additional loans against its
existing aircraft assets or a new rights issue. The FedAir
management team is exploring all options and further announcements
will be made in the months ahead.
Cash position
The management actions detailed above will reduce the equivalent
monthly cash burn of the Group, assuming zero revenue from both
fastjet Zimbabwe and FedAir, to approximately US$ 550,000 whilst
all flights are suspended.
As at 3 April 2020, the Group had cash reserves of US$ 1.88m
with no restricted cash. Of the Group's US$ 1.88m cash reserves,
US$ 0.43m is in Zimbabwe and currently unrestricted.
Capital Requirements
With the temporary suspension of all of the Company's operations
in April 2020, and the expected impact to the FedAir business for
the remainder of 2020, the Board is reassessing the going concern
ability of the entire group in its current form, with both the
FedAir and fastjet Zimbabwe businesses retained, until the Investor
Consortium can clarify its intentions and a new proposal and
valuation for the Disposal is agreed with the fastjet Board.
As announced on 12 March 2020, the Group had engaged with all
its main creditors who, following detailed discussions with
management, had agreed to defer due dates for repayments and/or
have agreed to settlement discounts to current carrying values of
their liabilities. Good progress has been made on this and the
Group's total liabilities could be reduced or deferred by between
US$ 1.0m to US$ 3.0m between April 2020 and July 2020. If achieved,
this will relieve significant pressure on the Company's future
cashflow forecasts.
Subsequently the Directors believe - based on current financial
projections, funds available and expected to be made available,
together with the revised creditor terms agreed above - that the
Group will continue to have sufficient resources to meet its
operational needs until the end of June 2020.
The headroom of available cash resources remains minimal and
will be drawn on in the next three months to sustain and settle
fixed costs and obligations of the Group, despite having reduced
these significantly already.
In the event that the Group is unable to complete the Disposal
or raise additional new capital by 30 June 2020, the Directors
believe the Group would be unable to continue trading as a going
concern.
The Company is continuing to assess the situation daily and will
provide further updates as and when required due to the
unprecedented external factors linked to the Covid-19 pandemic the
business is facing.
This announcement is released by fastjet plc and contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Kris Jaganah, Group Chief Financial
Officer.
Tel: +27 (0) 10 070 5151
fastjet plc
Mark Hurst, Group Interim Chief
Executive Officer
Kris Jaganah, Group Chief Financial
Officer
Liberum Capital Limited Tel: +44 (0) 20 3100 2222
Nominated Adviser and Broker
Andrew Godber
Clayton Bush
James Greenwood
William Hall
Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
Financial PR
Angharad Couch
Toby Moore
Nick Hayns
NOTES TO EDITORS
About fastjet
fastjet is a multi-award winning (including Skytrax World
Airline Awards Best Low-Cost Airline in Africa 2017) low-cost
African airline for everyone, who began its flight operations in
Tanzania in November 2012 flying passengers from Dar es Salaam to
just two domestic destinations - Kilimanjaro and Mwanza.
Today, fastjet's route network includes operations predominately
in Zimbabwe and South Africa together with interline arrangements
with carriers such as Emirates and Qatar. The airline has flown
over 3 million passengers with an impressive aggregate on-time
performance above 90%, establishing itself as a punctual, reliable,
and affordable carrier.
fastjet acquired FedAir, which provides unscheduled shuttle and
charter services to the game lodges in the Southern Africa region,
in October 2018.
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END
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