Fastjet drops Fly540 Kenya in favour of new operation

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African budget carrier Fastjet is to divest its Fly540 Kenya operation to one of the company’s directors for a nominal sum.

Fly540 Kenya had been inherited during Fastjet’s acquisition of Lonrho Aviation.

“After a thorough and lengthy evaluation of Fly540 Kenya, we concluded that converting the business into the Fastjet low-cost model would not be economically viable,” says Fastjet chief Ed Winter.

Fastjet will instead pursue a new strategy to launch a Kenya-based operation which, it says, will operate under the same low-cost model as its Tanzanian division.

Winter says the company will disclose further details on its Kenyan plans “in due course”. The company previously signed a tentative agreement for a tie-up with Kenyan carrier Jetlink Express.

Fastjet describes Fly540 Kenya as a “loss-making investment” and says that the sale, to director Don Smith, removes the company from the Fastjet group.

It had been treating Fly540 Kenya as an investment because it did not have financial control over the company – a matter which created a legal rift between the two sides.

Fastjet says it has not included the Fly540 Kenya losses in its consolidated accounts. Most of the investment, it adds, has already been written down and the outstanding $10 million will be written down in the full-year 2013 accounts.

“All legal and financial ties between the two companies have been dissolved and each group has indemnified one another against any and all liabilities relating to the segregation of the businesses,” says Fastjet.