Business News of 2014-05-16

Fly 540 to cease operations in Ghana

Citi Business News can confirm that domestic Airline Operator Fly 540 is pulling out of the Ghanaian market.

The airline has been operating in Ghana’s domestic market for the past four years until an international low cost airline, FastJet acquired their parent company.

The reasons for Fly540’s pull out according to sources close to the airline do not have anything to do with difficulties in the domestic market in Ghana. It is a decision which was taken at the group level. It is not clear yet the exact date they will pull out but Citi Business News’ source at the company says the pull out may occur in the next few months.

The effects of the board room wrangling that bedeviled the airline after the acquisition is taking a toll.

The company is said to be under serious financial stress hence, the decision to close down operations in Ghana and possibly the operations in Angola too. Fly540 currently commands 18 percent of market share in the domestic airline business. Their exit would leave Starbow, Africa World Airline and Antrak Air sharing their customers.

But the situation could again trigger the issue of monopoly of prices which sometime back kept air fares very high.

Fly540’s decision partly deflates the expectations from industry watchers who have praised the competition in the domestic airline industry in the past four years.

The row between Fastjet and Fly540

Fly540 CEO, Don Smith in February 2013 announced that the Kenyan regional carrier would have withdrawn the Fly540 brand license for Fastjet asking the low-cost carrier to stop using the Fly540 brand for its operations in Angola, Ghana and Tanzania within a week.

Fastjet had acquired Lonrho Aviation in 2012 and control regional carriers Fly540 Angola, Fly540 Ghana and Fly540 Tanzania which had been set-up by Lonrho as Fly540 franchise operators.

Fastjet has refused the statements by Fly540 as “false and damaging” saying that it had already paid to acquire the Fly540 brand and would take legal action against Fly540 if Smith would continue to “create” issues.

It said it had agreed with Smith and his partners to acquire Fly540 in Kenya as well but would now go ahead and work with JetLink Express instead.

Source: citifmonline.com
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