African non-frills airline Fastjet PLC (LON:FJET) took more heavy losses as new chief executive Nico Bezuidenhout retrenched after the previous ‘over-ambitious’ expansion plans.
Routes were cut back and the fleet shrunk, but revenues rose by 5% to US$68.5mln in 2016, with passenger numbers also up slightly at 783,317.
Costs rose by 29% caused by setting up new routes in 2016, which also lead to a cash outflow of US$52.3mln.
Most of these were axed when Bezuidenhout took over in August.
Fastjet cut capacity by 25% and the cost base will significantly reduce by the third quarter of 2017 with a cash flow break even position by the fourth quarter of 2017.
“Since the year-end, fastjet has completed a US$28.8m fundraising, entered into a strategic and operational partnership with Solenta, and significantly strengthened our Board.
“With these initiatives building on the benefits of the Stabilisation Plan, and although a number of challenges remain, fastjet is now close to being sufficiently stable and well positioned to be able to consider disciplined growth opportunities in our target African markets."
Losses for the year after tax were US$48mln (US$21.9mln).
Broker Liberum added that a large loss was expected as the group deals with problems inherited from the previous management team and challenging trading conditions.
Although the demand backdrop does not appear to have improved significantly, management's actions on costs, fleet and network are having the anticipated effects.
The group has secured a deal to return its remaining Airbus A319 aircraft to the lessor before the end of 2017E. Where the switch to smaller aircraft has been implemented, the anticipated reductions in cost and improvements in load factors and unit revenues have come through.
By the end of 2017E, management expects to have a fleet to two 100-seat E190 aircraft on dry leases deployed from Tanzania and two 50-seat E145 aircraft on wet lease from strategic partner Solenta deployed from Zimbabwe.
-- adds broker comment--