EasyJet founder Sir Stelios moves closer to low-cost African airline

Sir Stelios Haji-Ioannou, the founder of EasyJet, is set to launch a low-cost airline in Africa this year after taking a 5% stake in a new venture.

The easyGroup tycoon, who is embroiled in a long-running boardroom battle with easyJet, is backing a carrier that will operate under his Fastjet airline and be run by former easyJet executives.

Fastjet will operate from Kenya, Tanzania, Ghana and Angola. The ambition is to carry more than 12 million passengers a year, from the 500,000 at present, by cashing in on demand for regional travel from a burgeoning African middle-class.

EasyJet remained tight-lipped about the move, referring queries to a statement made last year that said the Luton-based airline would take "necessary action" if Fastjet infringed its rights.

However, Ed Winter, Fastjet's chief executive-in-waiting and formerly easyJet's chief operating officer, said the airline would avoid antagonising its European peer. "We have been 100% careful. We are absolutely aware of the agreement, and so is Stelios, and we are not infringing it in any way," he said.

Under the terms of Wednesday's announcement, an Aim-listed cash shell company called Rubicon has bought the aviation arm of Lonrho, an ancestor of the pan-African conglomerate formerly run by Tiny Rowland, in a deal worth $85.7m (£55m). As part of the deal, easyGroup will own 5% of Rubicon, and the airline will use Lonrho Aviation's network. It will operate from the Lonrho hubs in the four African countries. Operating as Fly540, Winter said a 12-million passenger target was feasible.

"If you take the four countries, they have a total population of 100 million people. If you estimate that all our customers come from just those countries alone, you could see three million of them becoming customers with us, flying a couple of times a year. That would generate something like 12.8 million passengers [annually]."

Winter said Fastjet would launch towards the end of the summer but not use its fleet of 10 turboprops and small jets. Instead it would seek to lease larger modern jets like the Boeing 737 or Airbus A319.

Another former easyJet director set to join Fastjet is Richard Boden. He said the business would aim at the west African market. "There is a significant shortage of direct point-to-point flying within the continent, particularly with west Africa. It is very difficult to get from capital city to capital city."

However, the financial health of African airlines remains fragile. According to the International Air Transport Association, airline traffic in the continent will grow by 4% this year, but African carriers will make a collective loss of $100m in 2012, having made no profit in 2011 and a profit of $100m in 2010.

EasyJet has been locked in a dispute with Haji-Ioannou since 2008 over its capacity plans and the purchase of new Airbus aircraft, although another dispute over further use of the easyJet brand was settled in a deal that could earn the tycoon at least £65m over 10 years. Haji-Ioannou and his family control 37.5% of the airline.

Haji-Ioannou said the move would help bring low-cost air travel to more Africans. "This is another small but significant step in bringing the dream of low-cost air travel to millions of people in Africa – the aviation industry's last frontier. Past experience shows that by halving fares, a successful low-cost carrier can encourage those people, who have never previously travelled by air, to fly."

Source: http://www.guardian.co.uk/business/2012/jun/13/sir-stelios-low-cost-african-airline-fastjet