IT CLEARLY seems that the days are numbered for the Fastjet Chief Executive, Ed Winter, to stay at the job after one of the low-cost airline’s shareholders initiated moves to oust him – apparently because of below-average performance and the waning of profits in recent times!
Sir Stelios Haji-Iaonnou, the EasyJet tycoon who invested in the Fastjet airline in 2012 is now calling for immediate ouster of the company’s CEO.
The Guardian, a UK-based world-famous newspaper, reported this week that Sir Stelios has repeatedly called for Winter to leave the company immediately rather than wait until a successor is found, as currently planned.
Ed Winter said in January he would step down when a replacement was found. But Sir Stelios has called for him to leave immediately.
To that end, Sir Stelios last week called for a shareholders meeting to oust Winter, whom he blames for the firm having run out of money.
He believes that the operating costs are too high for an airline with just six planes – and has blamed senior management for high spending, virtually ‘burning’ cash!
“Fastjet has a bloated cost base – which was created by Ed Winter and his staff. The only way to reduce the overheads is for Ed Winter to leave the company now – and the Chairman to start serious cost-cutting,” Sir Stelios was quoted as saying this week by The Guardian- UK.
Indeed, Ed Winter announced last month that he was stepping down – but planned to stay on with the company until 12 months after it has appointed a replacement!
However, Stelios wants him to leave at once, partly because of what is seen as unnecessary expenditure amounting to about 80 million pounds over the last three years.
“We do not consider that the current open-ended arrangement whereby he remains as CEO until a successor is found – and then remains on as a consultant for a period of one year – is conducive to cost-cutting,” Sir Stelios argued last month… Adding that, “whilst he remains a Board Director, he will obstruct any cost-cutting!”
Seemingly hammering the nail home, the tycoon revealed that “Ed Winter has refused to diverge from a completely flawed strategy of locating all top management and central functions at Gatwick Airport – near his own home!”
All this comes after Fastjet announced in January this year that its results for the year would be well below market expectations.
Analysts now forecast a US$20 million loss in 2016, compared with a $1.4 million profit in the previous year!
The company’s ambition was to carry more than 12 million passengers a year by cashing in on demand for regional travel from a fast-growing African middle class. But, it has taken longer than expected to set up hubs in countries such as Zambia and Zimbabwe.
Sir Steliois was recently reported as claiming that, if Ed Winter stayed, the CEO would “obstruct” cost-cutting – and blamed the clearly beleaguered Fastjet boss for the airline’s “ridiculously high cost base!”
Liberum, the air carrier’s house broker, forecasts that Fastjet will post an adjusted loss of US$35.3m for 2015 – and a marginal profit of $1.4m this year.
For his part, however, Sir Stelios argued that those estimates – which were arrived at based on Fastjet’s guidance, anyway – were “unrealistic!”
“The Board must move to guide the market on costs and revenues for 2016 as soon as possible, as this cannot happen with Ed Winter in place as CEO,” Stelios stressed.
Fastjet has been hit by the uncertainty caused by last year’s closely-fought presidential election in Tanzania, its largest market. This has led to a downturn in demand for flights.
Sharp falls in the exchange value of the Tanzanian shilling and the Zambian kwacha have also hurt the low-cost airline’s finances.
Now, the airline says it may need to raise funds this year after low demand for flights forced it to issue a profit warning in less than three months!
The company’s shares also plunged more than 40 per cent last week — thereby taking their fall in the past year to more than 70 per cent! The airline is listed with the London Stock Exchange (LSE).
Difficult market conditions in the African airline industry have lasted longer than the Management expected, Fastjet said in a trading update. Results this year will be worse than expected and the company does not expect to generate any cash in 2016!
“The challenging market conditions affecting much of the African aviation industry have been a lot more prolonged than the Management originally forecast,” Fastjet said in a statement.
The airline’s profit warning comes after many global carriers reported strong results in 2015! The International Air Transport Association (IATA) said global passenger traffic rose 6.5 per cent in 2015 – the biggest increase since 2010!
Fastjet said it had more than US$20m of cash available at the end of February this year, and that it had enough to meet operational requirements. But the company also said that it might seek to raise further funds later in the year!
In December last year, Fastjet blamed low demand for travel in its main market of Tanzania, as well as weak African currencies, for lower-than-expected revenues.
The company said that, “based on current Management forecast, the Board expects the results for 2016 to be materially below market expectations – and the group no longer expects to be cashflow-positive for the year.
“The Board may consider raising further funds during the year to provide additional headroom and ensure the company has the necessary resources to fund future growth as market conditions improve,” the statement says.
The company has announced it does not expect to be cash flow-positive this year due to the challenging conditions in the domestic aviation market.
Efforts to expand into Zimbabwe last October increased the challenges, causing Fastjet to issue two warnings on its 2015 revenue – and announced plans to cut capacity and costs.
The airline reported this week that it will start closing routes after burning through cash in its efforts to become the first pan-African discount airline, predicting 2016 earnings will fall “materially” below analysts’ estimates!
Analysts had been anticipating a pretax profit of $1 million this year following a loss of $35 million in 2015, for which FastJet has yet to report figures, based on the average of two estimates!