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.

British Airways parent reports loss

International Airlines Group, the parent company of UK-based British Airways, has reported a loss for the 2012 financial year.

The group reported a pre-tax loss of EUR997 million for 2012, compared to a pre-tax profit of EUR503 million for 2011, with the group’s recently acquired Spanish airline, Iberia, taking most of the blame for the turnaround. Restructuring and impairment charges for Iberia of EUR545 million impacted on group figures, and that restructuring is on going, with fleet reductions, reductions in staffing levels and cuts to capacity.

Although IAG saw a 10.9 percent increase in revenue last year, to EUR18.1 billion, it also made an operating loss of EUR23 million, compared to EUR485 million profit for the previous year. Despite the reported losses the markets took the news favourably, as predictions for the operating loss had been as high as EUR88 million. Accordingly, the group’s share price increased by as much as 5 percent in today’s early trading.

IAG’s chief executive, Willie Walsh, commented, ‘2012 has been a year of transformation for IAG – we bought Bmi and integrated it into British Airways and initiated our restructuring of Iberia.

‘Revenue was up 10.9 percent in the full year, while our fuel bill rose by 20.4 percent (to EUR6.1 billion) with non-fuel costs up 11.6 per cent (to EUR12 billion).

‘The divergent financial performance of our airlines continued. British Airways made an operating profit of EUR347 million, including Bmi losses, while Iberia made an operating loss of EUR351 million.

‘We have embarked on a significant transformation programme in Iberia – and these results emphasise further that the airline must adapt to survive. It must stem its cash losses and adjust its cost base permanently if it is to compete with other airlines in all its strategic markets and lay the foundations for profitable growth in the future.’