Fastjet licensing dispute with Fly540 intensifies

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The legal dispute between Fastjet and Five Forty Aviation, the parent of its Fly540 brand, has spread to all three operating bases included in the licensing agreement between the two parties, with Five Forty Aviation now demanding that Fastjet stop using the Fly540 brand in Tanzania, Ghana and Angola.

Details of the dispute emerged last week, when Five Forty Aviation said it was launching legal action over a $6.78 million debt which it alleged that Fastjet had failed to honour after the takeover of Fly540 by Fastjet parent Lonrho.

Fastjet rejected that claim out of hand, saying: "Fastjet has paid [Fly540 chief executive] Don Smith and his partners well in excess of $6 million for their interest in Fly540 and associated brands, and we will now aggressively seek to have our purchase contracts enforced."

Five Forty Aviation's action prompted Fastjet to re-assess its planned takeover of Fly540's base in Nairobi, Kenya - the last of four operating bases originally due to be included in its licensing agreement. Fastjet subsequently announced a memorandum of understanding with defunct Kenyan operator Jetlink Express.

But the three Fly540 operating bases already included in the licensing agreement - Dar es Salaam, Tanzania; Accra, Ghana; and Luanda, Angola - are the subject of an ongoing dispute between the two parties.

Adding to its earlier complaint, Five Forty Aviation now says that Fastjet is liable for another $6.9 million of debt in Tanzania, $500,000 in Angola and $300,000 in Ghana. It accuses Fastjet of safety breaches in addition to violations of the licensing agreement.

"As Fastjet's Africa Operations have failed to respond [to a letter dated 24 January], notice has been given to Fly540 Angola and Fly540 Ghana to repaint their aircraft in a neutral colour," says Five Forty Aviation. "Additionally, Fastjet's Africa Operations have to rebrand all of the sales offices, removing the Fly540 brand; return all materials containing the Fly540 logo; and rename the companies other than 540."

Fastjet dismissed the announcement, saying: "Five Forty Aviation is powerless to terminate purported brand license agreements for any Fly540 operations. Fastjet plc has responded to the unsubstantiated claims made by Five Forty Aviation regarding the Fly540 brand through the appropriate channels."

It also forcefully rejects allegations of safety breaches, which centred on alleged non-submission of safety reports and the operation of an allegedly defective plane on 14 December 2012. Fastjet says the flight in question was a "maintenance, non-public transport flight" for which it had obtained the necessary permits.

Fastjet chairman David Lenigas adds: "The company will not tolerate coercive and underhand practises. Issues created by Don Smith in Kenya have not and will not affect Fastjet's overall plan of becoming Africa's first pan-continental low-cost carrier."

The licensing dispute with Five Forty Aviation is one of three legal problems that Fastjet has encountered in recent weeks. Avmax Aircraft Leasing is also threatening legal action over alleged non-payment of leases, while the Tanzanian government claims it is owed outstanding tax from before the Fly540 acquisition.

Three Fastjet-branded Airbus A319s launched domestic operations in Tanzania in November 2012. Fly540 has ceased operating in Tanzania, but it flies two aircraft in Ghana and three in Angola.

The original business plan had been to phase in jet operations under the Fastjet brand in four African countries, making use of Fly540's air operator's certificates. Fly540 was then due to be gradually wound down as the Fastjet fleet expanded and took over its routes.