Fastjet posts first monthly profit; expects "substantial benefits" from lower fuel

Low-cost airline Fastjet (LON:FJET) enjoyed a double boost in December as it posted its first underlying monthly profit and carried its millionth passenger.

Helped by tumbling aero fuel prices, Fastjet Tanzania, the group’s principal operating company, saw a sufficiently positive EBITDA [underlying profit] in December for the group overall to post an underlying operating profit for the month.

The Africa- focused carrier reported very strong demand over the holiday period, which also started to see the benefit of lower oil.

Yield per passenger rose 20% compared to a year earlier with total revenue for the month up 106% year on year.

Fuel prices have fallen by a further 13% in January compared to December, Fastjet added, and the airline even lower prices in February and March.

Fastjet, which operates three Airbus 319s from Tanzania, re-iterated its does not hedge its fuel costs and is therefore realising “substantial benefits” from the reduction in the cost of crude oil.

Before the recent price fall, fuel represented around 40% of the airline’s direct operating costs.

The lower oil price also means a large direct cash benefit, it added.

In total, Fastjet carried just over 65,600 passengers in December at a load factor [passengers per flight] of 76% compared to 37,400 a year ago at 75%. The number of passengers flown was 4% higher than the previous month.

Ed Winter, Fastjet’s interim chairman and chief executive, said: "The announcement of our first profitable trading month is a great achievement and a huge milestone on the road to becoming the first pan-African low-cost airline.

“We have already proven that the low-cost model works to stimulate traffic and we have now shown that it can create a profitable business.

“The Tanzanian fleet of three aircraft is now producing more than double the monthly revenue compared to a year ago. This higher utilisation, combined with higher per passenger revenues and lower fuel prices, has been transformational for the business."

Broker Sanlam said it was a strong performance over the holiday period and though the first quarter is normally the quietest the airline is expecting the momentum to continue.

Shares rose strongly last week’s news on news of approval of Phase 1 of its licence application in Zambia and were 19% higher today to 1.08p.

Winter is hopeful the permit to fly in Zambia may come through by the end of the current quarter, after which it will look to expand into Kenya, Uganda, Zimbabwe and South Africa though this will require additional funding.