Disruptive challenges
In contrast to more liberalised markets around the world, however, African airlines still face uniquely disruptive challenges. Fastjet has experienced this more than most, repeatedly being forced to alter its growth trajectory as it comes up against a mixture of protectionism, political interference, high taxation and weak infrastructure.
Despite ambitious plans to ramp up services across the continent following its November 2012 launch, the airline to date still only operates domestic Tanzanian flights. In Ghana, the government has refused to lower airport taxes while dragging its feet over runway resurfacing work at Kumasi Airport. In Angola, restrictions on moving currency have stalled progress. In Kenya, Fastjet was taken to court by its own subsidiary, Five Forty Aviation.
But Fastjet chief executive Ed Winter is undaunted. “People are getting confidence in us,” he insists. “We’ve now got bookings stretching out for months and months, whereas when we started people wouldn’t book more than a couple of days ahead. And this is enabling us to really roll out the proper low-cost model.”
Though there is no firm date for launching the South African subsidiary, Winter says he would like to see the unit operating domestically by Christmas. International flights from Dar es Salaam to Johannesburg will likely come before then, with Fastjet securing route approvals in June following months of “lobbying hard”. If and when the airline does launch domestically, he says the extra competition will “only be good for the consumer. There’s a real case for a third airline [in South Africa]”.
Nonetheless, legal headwinds have clearly unsettled investors, with shares in the London-listed company losing 75% of their value since January. Winter accepts that the corporate structure of the South African unit is not ideal, admitting: “In five years’ time, it won’t look like it does now.”
In the meanwhile, the airline seems to be up against outright hostility in the South African airspace. Its decision to postpone its July launch in South Africa came as little surprise to observers. Its previous attempt to acquire defunct local operator 1time airline came unstuck in April, while its current partnership with Edward Zuma, the son of South Africa’s President, had already been pushed back from May.
For rival carrier Comair – which operates the low-cost Kulula and full-service British Airways brands in South Africa – this delay buys some time while it prepares possible legal action against the new market entrant. Citing the country’s strict foreign ownership laws, Comair chief executive Erik Venter describes Fastjet South Africa’s corporate structure as “very shady” and deserving of scrutiny.
“If the South African Civil Aviation Authority does its homework and says that Fastjet’s structure is not compliant with the Civil Aviation Act, then we won’t need to do anything,” he says. “But if the Civil Aviation Authority doesn’t take adequate action, then we might have to get involved.”
At Comair, Venter’s promise to unearth “what’s happening behind the scenes, in terms of [foreign] control” could yet scupper Fastjet before it gets off the ground. That would perhaps be a victory for South Africa’s strict foreign ownership laws. Given the wider disarray in the country’s aviation market, however, few would see it as a victory for passengers.