Fastjet Plc said on Wednesday it is in talks to sell its Zimbabwean operations to a consortium led by its biggest shareholder Solenta Aviation for $8 million, a deal which could help the South African low-cost carrier stay alive until 2021.
The company, whose shares plummeted 32% to a record low after the announcement, said it was also in talks with some of its major shareholders for a cash call.
Fastjet said if the restructuring plans do not pan out by the end of February, the Africa-focussed company would not be able to continue trading as a going concern.
The proposals come after Fastjet lost its Chief Executive Officer Nico Bezuidenhout – a turnaround specialist – to South Africa’s Mango Airlines in July.
Bezuidenhout had been instrumental in reviving Fastjet’s fortunes and shore up its dwindling cash pile, as it was saved from going under after striking a deal to raise funds late last year.
The company was also forced to divest operations in Tanzania, its home market, after battling tough trading conditions there.
Fastjet, which has operations in Zimbabwe and South Africa, said it continues to be loss making and is currently expecting a loss after tax of around $7 million to $8 million for 2019, compared with a loss of $65 million a year earlier.
The company cited persistent volatility and uncertainty in the Zimbabwean market for the shortcoming.
The low-cost airline said in June that it expects to be profitable on an underlying basis in 2019. It had said that profit will come from demand in Zimbabwe and South Africa, while the powerful cyclones that hit Mozambique had hurt operations.
The restructured firm will become a capital light business operating as a franchise house that would earn revenues through the FastJet brand and provide airline management solutions, while also continuing to hold its investment in the FedAir business, it said on Wednesday.
“The Disposal, if agreed, approved and implemented, would be expected to de-risk the significant uncertainty and cash drain that shareholders have historically suffered and allow the Group to continue operating under a more stablised and simpler business model,” CEO Mark Hurst said.
Fastjet, launched in 2012 and modelled on the likes of no-frills airlines easyJet and Ryanair Holdings, has been struggling with its cash needs for the last few years.