Fly540 gets new owners as Lonrho sells aviation business to Rubicon

A Fly 540 plane about to land at the Moi International Airport runway in Mombasa. The ownership of the regional low-cost carrier has changed hands, after Lonrho PLC, the parent company of the airline sold its aviation business on Wednesday. Gideon Maundu

The ownership of regional low-cost carrier Fly540 has changed hands, after Lonrho PLC, the parent company of the airline sold its aviation business on Wednesday.

In a statement to the London Stock Exchange (LSE) where Lonrho is listed, the company said it would sell the subsidiary to Rubicon Diversified Investments Plc in a deal worth $85.7million. The transaction is however subject to shareholder approval in an annual general meeting scheduled for June 29, 2012.

The sale of the aviation business—which owns Fly540—will see Lonrho acquire a controlling stake at Rubicon where it will now own at 73 per cent stake. Under the terms of the agreement, Lonrho will acquire 1.1 billion Rubicon’s ordinary shares which added to the current 9,500,000 ordinary shares it owns in the Rubicon will see it control 73.7 per cent of Rubicon's bigger issued share capital.

Lonrho's aviation business will now be rebranded to ‘FastJet’ under a brand licensing agreement with Sir Stelious Haji-Loannou, the founder of EasyJet and the incoming COO of the new company.

Fastjet, an African low cost airline will seek to grow be relying on Fly540’s current hubs of Kenya, Ghana and Angola to grow its operations, a fact that could renew competition with Kenya airways which plans to a launch a low cost carrier by the end of the year.

Kenya Airways (KQ) through it’s a low-cost subsidiary, Jambo Jet, will be seeking to make headway in the fast-growing domestic and regional flying markets, where smaller airlines most operating as a low-cost carrier have posed a serious challenge.

Low-cost airlines keep costs low by using small, relatively inexpensive aircraft that handle several flights each day. These airlines also change lower fares and offer fewer comforts — the price of a meal is not included in the ticket price for example.

With the Seven of the World's top ten fastest growing economies, and increased trade between Kenya and the rest of the world-especially Indian and China- Africa’s GDP and consumer spending has been steadily rising resulting in a rapid expansion of air traffic into and from Africa.

On Wednesday for example, Kenya airways announced it was increasing frequencies to Dubai, Mumbai, and Jeddah as well to Kisumu - Kenya’s third largest City.

Fly540 had a turnover of US$57 million and carried 525,375 passengers in the 15 months to 31st December 2011. The company made a net loss of $19million on account of start-up and establishment costs of its operations in Angola and Ghana.