Easyjet deal moves African budget airline closer to realityBy EAST AFRICAN Writer | Thursday, June 14  2012 at  11:45

The ownership of regional low-cost carrier Fly540 has changed hands, after Lonrho PLC, the parent company of the airline, transferred its aviation business to a partnership between a low cost European air operator and an investment firm.

In a statement to the London Stock Exchange (LSE) where Africa-focused conglomerate Lonrho is listed, the company said it would sell the subsidiary to Rubicon Diversified Investments Plc and EasyGroup in a reverse takeover deal worth $85.7million.

Rubicon joined forces with Easy Group, owned by easyjet founder Stelios Haji-Ioannou, to acquire Fly540--Lonrho's aviation business--in a significant step towards the formation of a pan-African low cost carrier.

The transaction is however subject to easyjet's shareholders approval in an annual general meeting scheduled for June 29, 2012.

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 already owns, gives it a 73 per cent stake in the LSE-listed Rubicon.

EasyGroup would own five per cent of Rubicon.

Fly540 will now be rebranded to ‘FastJet’ under a brand licensing agreement with Sir Stelios, who will become the chief operations officer of the new airline.

Fastjet will seek to grow by relying on Fly540’s current hubs of Kenya, Ghana and Angola, a plan that could renew competition with regional giant Kenya Airways which plans to launch its own budget 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 mostly 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 charge lower fares and offer fewer comforts — the price of a meal is not included in the ticket price for example.

Fly540 had a turnover of $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.