Fastjet takes Fly540 to court over Kenyan subsidiary

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Fastjet has hit back at Fly540 chief executive Donald Smith by launching proceedings in Britain's High Court over his refusal to relinquish control of Nairobi-based subsidiary Fly540 Kenya.

The Stelios Haji-Ioannou-backed carrier acquired Fly540 through a reverse takeover of Lonrho Aviation last June, but the partnership quickly unravelled due to a wide-ranging and complex dispute over ownership and licensing agreements.

As well as retaining control of Fly540 Kenya, Smith has demanded that Fastjet rebrand its Fly540-operated aircraft in Ghana and Angola. He argues that the agreement signed by the two sides on 10 June 2012 is void as Fastjet has not honoured up to $14.5 million of Fly540's legacy debts.

Announcing details of the High Court move, Fastjet chairman David Lenigas says the carrier is "reluctant to take legal action" but that it has exhausted all alternatives to court enforcement.

"We are disappointed that the company [Fastjet] has had to resort to this measure to force Mr Smith to complete his part of the commercial transaction that he agreed and signed off in June last year," Lenigas says. "The company has paid Mr Smith a fair and reasonable price for his controlling interest in Fly540 Kenya and we expect to receive in full what we have paid for."

Fastjet says it is seeking a declaration from the High Court to confirm that Smith has been paid in full for his Fly540 shares, and instructing him to "hand over all the necessary documents to complete transfer of control of Fly540 Kenya".

Its statement makes no reference to the parallel dispute over legacy debts from Fly540's subsidiaries in Ghana, Angola and Tanzania. The embattled airline has also recently disputed requests for outstanding payments of $2.2 million by the Tanzanian government and $2 million by lessor Avmax Aircraft Leasing.

Under its original business plan, Tanzania-based Fastjet had aimed to rapidly expand into Kenya, Ghana and Angola. It planned to grow its fleet of three Airbus A319s to as many as 12 aircraft by the end of 2013, utilising Fly540's air operator's certificates while gradually phasing out the loss-making subsidiary.

Fastjet has since announced its intention to acquire two defunct African operators - 1time Airline in South Africa, and Jetlink Express in Kenya.