FastJet Has an Uphill Battle to Prove an African Low Cost Carrier Can Work

Jun 19, 2012

More Reading on This Topic: FastJet

When easyJet’s founder started making rumblings about starting FastJet last year, I thought it was crazy. Back then, it was presumed that FastJet would compete with easyJet in Europe and that made no sense at all. Now, however, we know FastJet is meant to compete with … nothing. It will be mostly alone as an African low cost carrier. That sounds less crazy, but maybe only slightly so.

Why should I go into all the details of this venture when I can let a couple rich white guys in a room with dark wood paneling do it?

For those who didn’t bother sitting through the video, let me summarize. FastJet is not a startup airline in the regular sense. Instead, it will start using the platform of an existing airline that will disappear … Fly540. Fly540 likes to claim that it’s “Africa’s Low Cost Airline” on its website, but apparently that’s not working out so well.

The airline flies a mix of small airplanes – ATRs, Dash 8s, and 50-seat CRJs. Its big base is in Nairobi with a fair bit of flying in Tanzania next door. There are separate operations in Ghana in west Africa and Angola in southern Africa as well.

Now, the airline is going to morph into FastJet. From what I can tell, this basically means letting the people of easyGroup come in and buy bigger airplanes to replace the little ones buzzing around. That is so far the only real difference I can see.

The new airline will still fly from Kenya, Tanzania, Ghana, and Angola. I assume there will be an attempt to grow beyond that over time, but I haven’t really seen any other details at this point.

Dreaming of Low Cost Success in Africa
Is there room for a low cost carrier in Africa? Probably. It’s a big place and it’s not easy to get between big cities without flying. There are, however, very infrequent flights connecting these cities, and they aren’t cheap. There should be huge opportunity, right? Right. Theoretically.

There isn’t a ton of demand today, and maybe that just means that nobody has figured out the best way to stimulate it yet. Maybe FastJet will crack the code. That’s what Lonrho is hoping.

Today, Fly540 is owned by Lonrho Plc. From what I can tell, Lonrho is a mega-super-congolomerate that does a bunch of stuff all around Africa. It sounds like the airline side of the business isn’t doing well and Lonrho decided to get outside help.

So, it went to easyGroup and said “pretty, pretty please come and make this thing work.” And that’s where we are today.

Doing Business in Africa
Having a well established African company backing you is probably helpful. A lot of politics in Africa seems to be based on relationships. It’s not an easy place to do business, but Lonrho has made it work. So that’s a plus.

But airlines in Africa are notoriously losers. How many successful airlines do you know in Sub-Saharan Africa? You can probably count the number on one hand and most are in South Africa, a very different market from what FastJet is trying to tackle.

Does that mean that this is doomed to failure? I wouldn’t go quite that far. Maybe FastJet will be the one to really make a Pan-African low cost carrier work. I’m just not holding my breath, but I would love to be proven wrong.

Brett

11 responses to “FastJet Has an Uphill Battle to Prove an African Low Cost Carrier Can Work”

David Johnson

Jun 19, 2012 at 6:29 am

Have powerful people in Govt made public noises to say they are supportive of this ?

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1. CF
  
  Jun 19, 2012 at 11:15 am
  
  David Johnson – I haven’t heard of anything yet, but it was just announced. We’ll see if anyone jumps onboard.
  
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David SF eastbay

Jun 19, 2012 at 7:14 am

Why would you call an airline Fly540 in the first place, what does it mean?

Good luck to them.

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1. CF
  
  Jun 19, 2012 at 11:16 am
  
  David SF – Apparently the name referred to the KES 5,540 roundtrip fare on its first route from Nairobi to Mombasa. I have no idea why it wouldn’t be Fly5540.
  
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Sean S.

Jun 19, 2012 at 9:43 am

Its hard to imagine theres a significant base of people outside of governement employees that could afford to fly in many countries, low cost or not. I think theres simply too many non-aviation related economic issues at play for airline travel to pick up to say the level of SE Asia or the Gulf countries.

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Embo

Jun 19, 2012 at 9:57 am

That’s true, but don’t forget that there’s lots of tourists flying around down there too. In May I took 2 Precision Air flights and 1 Coastal Aviation flight and was pretty shocked that there wasn’t a single seat open on any of the flights (and May is low season).

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coldtusker

Jun 19, 2012 at 1:31 pm

Cranky, apart from fuel, the main cost of a flight are the high taxes levied by many governments who look at flying as a luxury.

What a US (local flight) passenger pays as ‘taxes’ & an airline pays as airport (landing, etc) fees is a fraction of what African pax & airlines pay.

Compare the taxes on NBO-ACC (5 hours & flown daily by KQ) taxes vs LGA/JFK-LAX.
Compare the taxes on NBO-EBB/KGL (1.25 hours direct) vs ORD/MDW-DTW/MSP, etc

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1. CF
  
  Jun 19, 2012 at 2:12 pm
  
  coldtusker – Very true that taxation is insane in Africa. While a flight within the US isn’t a fair comparison because you’ll always pay more when crossing borders, it’s still shocking nonetheless. On the Nairobi – Accra rountrip, you’ll pay $100 tax to Ghana and a $40 tax to Kenya. These are based on the fare, so the amount of tax is crushing. Take a look at the short hop from Nairobi to Dar Es Salaam. You’ll pay $40 to Kenya and $38 to Tanzania.
  
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drg

Jun 19, 2012 at 5:57 pm

OK this is going to come across as bitchy but I have to take this assessment with a big grain of salt when you fail to mention that Africa already has a low cost carrier that have been fairly successful. In particular, I am thinking of Kulula.com, which has been around for 11 years. Kulula is the lowcost brand operation of Comair Ltd., which for a few decades also has operated regional flights under the British Airways brand. It operates a fleet of Boeing 737-800s on domestic routes, as well as to Namibia, Zambia, Zimbabwe and Mauritius. It’s success has prompted South African Airways to launch its own “Mango” LCC.

Naysayers will say South Africa may not be a typical African market but I suspect somebody actually from Africa would point out that there is no more of a typical African market than there is a typical European one. And if the carrier works into places like Zambia and Namibia, something similar certainly could play in Kenya, Tanzania and other tourist heavy markets in East Africa.

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1. tharanga
  
  Jun 20, 2012 at 4:25 pm
  
  And kulula has the most fun liveries around.
  
  African economies are growing. I don’t know if it will be these guys, or some of the established carriers (Kenya? ET?), or something else new, but somebody is eventually going to end up building a nice business flying around Africa.
  
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Zack Rules

Jun 20, 2012 at 4:50 am

There is definitely a market. I spent some time in Ghana and even though its two main cities, Access and Kumasi were about 100 miles apart as the crow flies, it still took about three hours to get there. A ulcc would make a killing on routes such as that. There is certainly a large enough middle class there.

And taxes are mentioned, Ghana was considering building a new airport in Accra even though the current one is far below capacity. Talk about a costly waste!

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