Sir Stelios Haji-Ioannou set for take-off with a pan-African airline in Lonrho deal

 

Daniel Howden
Thursday 14 June 2012 11:06
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EasyJet's founder Sir Stelios Haji-Ioannou moved closer to launching a pan-African, low-cost airline yesterday after a British investment firm he is part of bought Lonhro's African aviation business.

The deal will see Lonhro's popular East African, low-cost carrier Fly540 expand its existing operations before being relaunched as Fastjet later this year.

The deal values Lonrho's aviation division, which operates in Angola, Tanzania, Ghana and Kenya, at $85.7m (£55.1m) and injects that business into the Aim-listed cash shell Rubicon in which the easyJet founder took a 5 per cent share stake.

Through a reverse take-over, Lonrho will end up with a 74 per cent stake in Rubicon, which plans to relaunch the business as Fastjet.

Ed Winter, the chief executive of Rubicon, said customers should expect average fares as low as $70-$80 on link-ups between fast-growing cities such as Kenya's Nairobi and Angola's Luanda.

"It is the optimum time to launch because Africa is hugely under-served from an aviation perspective. It is the last frontier for aviation," said Mr Winter, who was formerly a director of the British Airways offshoot Go and then chief operating officer of easyJet.

"Africa has a rapidly growing middle class with GDP growth fuelled by oil discoveries. It has few good roads or railways and cheap air travel is a real alternative."

African aviation is noted for its poor safety record and awkward connections. Investment has been hobbled by complex cross-border regulation designed to protect national carriers from competition or foreign takeovers.

African aviation is valued at $56bn a year, and passenger numbers on the continent are expected to grow from nearly 68 million in 2010 to more than 150 million in 2030.

The sector is projected to grow by 4 per cent this year and keep growing at 1 per cent above the global average for the next 10 years, analysts said.

The Kenya-based investment adviser Aly-Khan Satchu said that anyone flying regularly in Africa can see both the potential and the drawbacks of the current service, which is often poor in quality and excessively expensive.

"It's a no-brainer. If you fly around Africa you see fuller planes but some of the highest fares in the world," he said.

Flag carriers such as British Airways have been expanding their coverage of the continent and upgrading planes in recognition of increased business traffic.

However, the South Africa-based analyst Linden Birns warned that many low-cost operators in East Africa, Nigeria and South Africa were struggling to find the finance to upgrade their fleets of 1980s "gas guzzlers" and offer competition to the pricier alternatives. "Africa has got so much pent-up potential that if a low-cost airline can get in and compete it's going to create new air corridors," he said.

Sir Stelios said his recipe of "halving fares" would encourage people who have never travelled by air to fly: "For Africa, with its densely populated cities separated by great distances, this means a new market of millions."

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