Fastjet losses cause shares to nosedive

The value of shares in budget airline, Fastjet, fell yesterday after it reported deepening losses and a reduction in its cash pile.

The negative results reported by the British-based holding company for a group of low-cost carriers that operate primarily in Africa are believed to be the result of the failure of its ambitious drive to fly more planes.

The airline reported operating losses for the first half of this year of $31m, almost three times as high as its $12.8m loss in the same months last year. This meant that its pre-tax profit of $6.4m in the first half of 2015 has translated to a loss of $15m for the first six months of this year.

As a result, the company’s stock fell by more than 17 percent to £0.2095p following the announcement. The company’s reduction in cash has also caused concern, falling from USD71m in June last year to $3.9m by the end of the first half of 2016. However, the company has since raised a further $20m to gain some breathing space.

Gerald Khoo, an analyst with Liberum was quoted in The Telegraph, saying: ‘Challenging economic conditions in Tanzania and overly ambitious capacity growth resulted in a collapse in load factors. Neither passenger numbers nor revenue kept pace with the additions to seat capacity, and losses have grown.’ He added that that the airline’s ‘substantial’ 61 percent increase in seating capacity in the first half ‘was not a commercial success’. This was due to a reduction in its load factor.