Africa’s new low-cost carrier FastJet, which is backed by easyJet founder Stelios Haji-Ioannou, and Lonhro plc, the pan-African investment group, is launching its operations in November, and could open up African skies, or at the very least shake up Africa’s aviation industry.
Heralded as Africa’s first continent-wide low cost airline, FastJet will use operating licences held by Lonhro’s budget airline Fly540 to establish flights in Ghana, Kenya, Tanzania and Angola. These four countries all have large scale oil or gas developments and burgeoning middle classes with an appetite for travel.
Stelios Haji-Ioannou, who set up easyJet in the mid 1990s, has described Africa as “the aviation industry’s last frontier” and said:
“Past experience shows that by halving fares, a successful lowcost carrier can encourage those people who have never previously travelled by air, to fly. For Africa, with its densely populated cities, separated by great distances, this means a potential market of millions.”
FastJet has set itself ambitious targets. It is looking to carry around 12 million passengers a year, which will mean it will need between 30 and 40 aircraft, according to Richard Blakesley, FastJet’s finance director. FastJet expects to offer average fares of US$70-80 before tax, which could go down to as little as US$15-20 if booked early.
“That price will demonstrate that air travel can totally change the way people are travelling in Africa” Ed Winter, CEO of FastJet noted.
The timing of the launch of FastJet’s operations will bring it in to direct competition with Kenya’s new subsidiary Jambo Jet, which is expected to be a low-cost carrier launching operations at the same time. One challenge that FastJet will face is the ability to offer low fares in African countries where there are high departure taxes. In Kenya for example the departure tax is around US$60.
But perhaps the principal challenge that FastJet will face is the way that African countries will react to a low-cost carrier with interests outside the continent that has declared its intent to dominate Africa and open up African skies.
The Yamoussoukro Declaration, set up to liberalise Africa’s skies, remains unimplemented, largely because African countries still protect their own national carriers from competition, even if they are loss-making. This is the principal reason African countries have resisted allowing civil aviation between their territories, refusing to sign up to bilateral air services agreements as legislative building blocks to increasing flights between African states. The net effect of this protectionism is that there cannot be any effective competition between airlines, so the liberalisation of Africa’s skies simply won’t happen.
Some commentators believe that as FastJet will not be a national carrier, this might reduce political interference over new routes being awarded to them by African governments, and may enable them to unlock the intra-African aviation market by the back door.
There is also a good precedent in South Africa, where low-cost carriers have largely been welcomed, and are becoming more prolific.
On the downside, there have been numerous failures of African airlines, caused in the main by high operating costs, low reliability, and over-ambitious plans to open intercontinental routes. FastJet will start its operations with a young fleet, so costs and reliability should not be an issue, but the key question is probably whether FastJet can rein in its declared ambition to conquer Africa and achieve steady sustainable growth without over expanding too quickly. We shall see.