Africa focused low cost carrier fastjet (LON:FJET) is growing in confidence after a pivotal 12 months.
July saw record numbers of passengers, while a deal has just been struck with a Chinese finance group that before too long should give birth to a new operation based in Zimbabwe.
News today revealed a new Airbus A319 - the first plane to be bought rather than leased - is due to be ready for operations by the end of next month.
It is earmarked as the first aircraft in the group's Zambia fleet. And it will mark a doubling of the overall fleet, to six aircrafts, once operational.
This is a far cry from a year ago and the doubts the airline would ever establish itself, despite operating international flights from its base in Tanzania since the end of 2013.
Legacy disputes, problems getting access into other airports in Africa and worries the money would run out before fastjet reached critical mass had taken a toll on its investors’ patience and their pockets.
In the event, in April, the backers dug deep again and their rewards for a not inconsiderable cash injection of £50mln are now finally starting to come into view.
One reason investors have remained supportive is that the idea behind fastjet has always seemed sound.
Africa is seen as the last great mass travel destination yet to be developed.
President Obama called it ‘the continent on the move’ in his recent trip to the region and highlighted high GDP growth currently in many African states.
Low-cost airline penetration of the African market is low by global standards.
No-frill carriers only account for about 10% of airline capacity compared with 20-40% in other regions, broker Liberum estimates.
And much of this existing capacity is South African airlines Kulula and Mango that only operate internally.
FastJet was set up in 2012 to capitalise on this opportunity, with management using the experience they had gleaned establishing easyJet in Europe.
It’s been a bumpy ride but once Zimbabwe and Zambia, the bones of the network will be in place.
Putting the flesh on will involve a significant increase in the fleet size. It is planned that this will happen quickly.
FastJet’s three A319 aircraft in Tanzania are now running at full capacity and the plan is have 34 planes in operation by 2018.
That’s a major expansion and will require careful handling, but management has done it before and even after this expansion the fleet will still be small compared to European standards where easyJet has more than 210 aircraft and Ryanair almost 320.
Liberum is among the most bullish of the brokers that follow the airline with a target price for the shares of 272p compared to a market price of 93p.
That target is based on a sharp increase in both revenues and profits over the next few years.
Turnover is forecast to triple in 2016 to US$271mln as more planes come on stream and be followed by a further 75% jump to US$474mln in 2017.
Profits will reflect the sales surge, with Liberum expecting a US$12mln profit in 2016 rising to US$49mln in the following year.
Gerald Khoo, Liberum’s airlines watcher added: “It [fastjet] is poised to seize first mover advantage to become a Pan-African carrier with bases in up to six countries.
“This would position it to exploit and stimulate rapid growth in intra-African air travel, underpinned by above-average economic growth and GDP per capita improvements.”
Khoo concedes there is plenty of execution risk, but unless it decides to buy all its new planes, rather than lease, calls on shareholders should be over.
And with things elsewhere moving in the airlines favour, the numbers may not look so ambitious.
Lower oil prices are already having a benefit said chief executive Ed Winter recently with costs with fuel down to third of all expenses compared with 42% previously.
After a wobble in early August, the shares have started to rise again and if the new licences come through as hoped, cruising height may be a lot higher in future.