Comment: Sir Stelios could fly high in Africa

Euromonitor International travel and tourism analyst Paz Casal looks at easyJet founder Sir Stelios Haji-Iannou’s latest venture, in Africa.

Fastjet has the right approach to successfully develop a Pan-African airline network

Driven by the opportunities of an underserved domestic and intra-regional air transport market as well as poor land transport infrastructure, Fastjet, backed by easyJet´s founder Sir Stelios Haji-Ioannou, officially started operations in November 2012 and aims to gradually expand to other Sub-Saharan regions to become the first ever Pan-African budget carrier, introducing European style LCC models across Africa.

There is no doubt that Fastjet is tapping into enormous potential for airline expansion in Sub-Saharan Africa, particularly as these economies expanded at an average of over 5% in 2012, according to the IMF. And while it’s unlikely to be a completely smooth ride due to Africa´s high operating costs, government protectionism and corruption, Fastjet’s prospects are nonetheless looking good, based on the airline´s cost structure, international partnerships and aggressive growth strategy.

African expansion opens up opportunities

Fastjet is planning to stimulate demand by increasing route options and making air travel more affordable to the rapidly growing business and consumer class. It’s also being proactive in looking to establish pan-African networks by setting up affiliated airlines in individual markets as a way to overcome bilateral restrictions that operate in the region.

Through its acquisition of regional operator Fly540, Fastjet, has access to air operator certificates in Accra, Nairobi and Luanda and has already applied for flying rights to Mombasa (Kenya), Entebbe (Uganda), Kigali (Rwanda) and Juba (South Sudan).

Furthermore, the company is currently in negotiations to buy South Africa´s recently liquidated LCC 1time. South Africa accounts for almost 40% of the Sub-Saharan African air market in value terms, while LCC value sales here are forecast to increase by 17% between 2011 and 2016.  The acquisition will potentially increase the number of available route networks from South Africa to the rest of the continent and enhance Fastjet´s ability to dominate the low cost air market in Africa.

In addition, as part of its strategy to grow into a pan African LCC, Fastjet has confirmed it is in talks about a potential partnership with Emirates Airlines, which currently flies to 24 destinations in Africa. The partnership will enable travelers in Africa to connect to the rest of the world through Emirate´s Dubai hub and boost Fastjets passenger’s traffic.

Fastjets´s growth strategy will outweigh the risks

Fastjet is already focusing on a strong differentiation approach to overcome competition from national carriers. In a region with a very poor aviation safety record the carrier will benefit from operating flights on international standards of safety and reliability.

The ability to pay online with M-Pesa and Airtel, the main mobile payment mechanisms in Africa, will be the next big development in Fastjet´s evolving digital strategy and the airline will significantly profit from the implementation of these mobile capabilities, challenging Sub-Sahara´s cash based economy and its lack of internet access.

The challenges are great, but FastJet appears to have sensible strategies in place to overcome them and take advantage of the potential on offer.