Towards the end of September this year, African low-cost airline Fastjet is expected to launch flights between Tanzania’s commercial hub Dar es Salaam and Johannesburg in South Africa.[hidepost=9][/hidepost]
According to Fastjet CEO Ed Winter, South African Airways (SAA) currently has a monopoly on this route. Fastjet is predicting that this new service will attract Tanzanians looking to shop in Johannesburg, as well as South Africans working in Tanzania.
The London-listed company launched flights under the Fastjet brand at the end of 2012 and currently flies a number of routes in Tanzania. Fastjet is also involved with the Fly540 brand which operates in Kenya, Ghana and Angola. Fastjet is backed by Easyjet founder Stelios Haji-Ioannou.
Fastjet’s rates are certainly competitive. An online search by How we made it in Africa on 8 September revealed that a SAA return ticket from Johannesburg to Dar es Salaam (leaving on 1 November; returning 6 November) will set you back just over US$500. FastJet’s quoted price for the same trip is about $200 cheaper. A one-way ticket for its local Tanzanian routes can cost under $30.
Winter says Fastjet operates a typical low-cost model where travellers who book far enough in advance can access these low rates. Those who book on the day can however, pay up to $150 for a one-way trip within Tanzania.
“If you look at our model, if you book early, and you make your plans early, then you do get a cheap seat, but if you book at the last minute, you pay a lot, lot more… So the average fare on the aeroplane is very sustainable, and that is the model that works in Europe and everywhere else with a low-cost airline model,” Winter explains.
He says the trick to making the low-cost model work is knowing how many tickets to sell at a low price, while keeping enough seats open for those purchasing at the last minute.
Protecting state-owned airlines
Winter, who manages Fastjet’s operations from the company’s head office in the UK, has over 40 years experience in the airline industry. He started out as a pilot and has held various senior management positions at airlines such as British Airways and Easyjet.
The 65-year-old industry veteran explains that when he first started in the Fastjet job, he underestimated the extent to which African governments are willing to protect their own flag carriers by denying the entry of competitors. “The level of protectionism that one sees has astounded me,” says Winter.
A lack of bilateral air service agreements between African governments are one of the reasons for the relatively low number of flights between African countries. A bilateral air service agreement is in essence an agreement which two nations sign to allow civil aviation between their territories. For many countries one of the major motives for not signing these agreements has been to protect their own national flag carriers.
“If you go around all the [African] countries, there are loss-making state airlines, and the protectionism being exhibited by virtually all of these governments is doing nothing other than to reduce the level of air transport, kill competition and create a situation where they are going to continue subsidising their own state airline.”
He says that not too long ago, Europe was in much of the same position, with each country subsidising its state airline. “Liberalisation has brought absolute benefits to the consumer, it brought benefits to each of the countries in that they are no longer saddled with huge subsidies for their state airline, and it has created a really efficient aviation network within Europe. Africa needs the same.”
Winter wants to turn Fastjet into a truly pan-African airline with operations across the continent. He says the company is currently in negotiations with various countries, although he didn’t want to reveal any specifics.
Operating domestic routes in South Africa, the continent’s most developed economy, has always been a priority for Fastjet. Since the end of last year, the airline has had a number of false starts in South Africa. An attempt to buy bankrupt South African airline 1Time didn’t work out, and Fastjet also faced criticism when it announced a partnership with a company involving South African president Jacob Zuma’s son.
Winter, however, remains determined to launch in South Africa. “We want to create an airline within South Africa… We’ve had a couple of abortive attempts at doing that. 1Time looked like the right vehicle to do it on, but that just didn’t work out with the creditors, and we looked at other ways of doing that. But yes, we absolutely 100% intend to launch an airline in South Africa… If you look at the marketplace in South Africa, prices are still way too high.”
In June this year, the airline announced it has signed an agreement with Red 1 Airways to launch the Fastjet brand in Nigeria, Africa’s most populous country with over 170 million people. According to Winter, Fastjet will only be a minority shareholder in the proposed Nigerian entity. The capital required for this venture will be the responsibility of Red 1, while Fastjet will provide its expertise in low-cost aviation.
Winter is optimistic about the potential for increased air travel within the greater West African region, one of the most underserved regions in the world. In a country like Guinea, travellers wanting to travel to another West African country often fly via Europe.
Aviation is a notoriously difficult industry in which to turn a profit. Africa’s regulatory and political challenges make Winter’s job even more difficult. However, he doesn’t seem too fazed by the challenges.
“I am very passionate about making this happen. We have met resistance, we are going to continue meeting resistance, but I am passionately determined that this is something which will bring huge [benefits] to the continent.”