African low-cost carrier fastjet has reached an agreement to dispose of its holding in Fly540 Kenya, the loss-making investment it inherited as part of the acquisition from Lonrho Aviation, to Don Smith, a director of Fly540 Kenya for a nominal sum.
The agreement wholly removes Fly 540Kenya from the fastjet group with all legal and financial ties between the two companies being dissolved. Each group has also indemnified one another against any and all liabilities relating to the segregation of the businesses.
"Following a period of complex negotiations, we are delighted to have achieved a successful outcome for all parties. After a thorough and lengthy evaluation of Fly540 Kenya, we concluded that converting the business into the fastjet low-cost model would not be economically viable,” said Ed Winter, interim chairman and chief executive, fastjet.
"Disposing of our investment in Fly540 Kenya allows us to pursue our priority objective of creating fastjet Kenya as a new entity which will operate to the same low-cost model, international standards of safety, reliability and punctuality as fastjet Tanzania and utilise the same commercial strategy and distribution platforms,” he added.
Despite confirming its intention to establish the new Kenyan budget airline business, fastjet remains quiet over its plans for the venture and simply confirms that further information on the airline’s conception will be announced in due course.
Fly540 Kenya has been treated as an investment in the fastjet Group accounts as the carrier does not have financial control over it and has not included its losses in the Group consolidated accounts. Most of the investment has already been written down, it acknowledges, and the remaining $10 million will be written down in its full year 2013 accounts.