It is an intriguing combination: entrepreneur Sir Stelios Haji-Ioannou and Lonrho, one of the preeminent names in African trade.
If you’ve been reading the business pages you will know the two have come together to form FastJet, Africa’s leading low-cost airline.
With a population of one billion people and economic transformation underway, the continent represents the last great frontier for air travel.
Lonrho is the owner of Fly540, which will act as the platform for the launch of FastJet.
It has been flying in the region for around six years now, has 10 planes (seven turbo-props and three regional jets) and, significantly, has licences to operate from hubs in Ghana, Kenya, Tanzania and Angola.
Fly540 is being injected into AIM-listed cash shell Rubicon Diversified Investments (LON:RUBI) in an all-share deal worth US$86 million.
Lonrho will hold have 73.7 per cent of the business, which will be renamed FastJet, with Stelios's easyGroup receiving a 5 per cent stake and an option to acquire a further 10 per cent at a 30 per cent premium to the price of the last fund-raising.
The easyJet founder will be on the board, although day-to-day control of the group will fall to chief executive designate Ed Winter, another pioneer of no-frills travel - first with BA’s low-cost airline GO and then easyJet. And he is relishing the challenge.
“Air travel in Africa in general has been reserved for business people or a thin strata of society, high-wealth individuals,” Winter told Proactive Investors.
“It is not for the ordinary man in the street. The ordinary man in the street either doesn’t travel or if he does he travels long, dangerous journeys by bus or car.
“This inhibits him from travelling. It means that he can’t visit relatives or go where his skills are needed. We aim to democratise air travel.”
Democratising air travel means offering tickets for as little as US$20 before taxes one-way. While low by European standards, it might easily be a week’s wages in Ghana.
That said fares compare favourably with the alternative – bus – where journeys are arduous and dangerous. FastJet is pledging to work to European standards of safety security and customer service. “Neither Stelios nor I would be involved in an airline that didn’t”, said the FasJet CEO.
If Winter and his team get the offering correct then the prize is potentially huge.
There are 100 million people combined in the four countries where the new FastJet has bases, and 335 million in the 15-member Economic Community of West African States.
It only has to tap into a small proportion of the population to have a viable business.
In fact if say just three per cent of that 100 million use the service twice a year this translates into a business carrying 12 million passengers a year.
The aim is just that - to get passenger numbers up to 12 million a year. It is a fairly ambitious target which would equate to a 40 plane operation turning over around US$1 billion a year. Fly540 currently carries around 750,000 passengers per year.
However you only have to look at the low-cost travel revolution here at home in the late 1990s and earlier noughties that spawned EasyJet, Ryanair and GO to realise it is an achievable objective.
Winter hopes FastJet will take delivery of its first leased aircraft by October and could amass a fleet of 15 in the next 12 months. However a lot will depend on just how fast routes take off.
The maintenance will be outsourced to a big, European firm experienced in dealing with demands of the budget airlines and used to delivering a quality service.
There has been a little grumbling in the City about easyGroup’s brand licence agreement with the FastJet, with Stelios's company receiving 0.5 per cent of the revenues generated by the airline for 10 years on top of a monthly consulting fee.
However, a simple back-of-the-envelope calculation suggests the relationship more than pays for itself if (as is likely) it results in lower leasing, employee and supplier costs.
Still, it is unlikely to be a turbulence-free journey as FastJet develops, a fact Winter acknowledges.
The initial challenge for the team managing it is to get African passengers accustomed to the novelty of frequent, reliable air travel.
It is one of the idiosyncrasies of the continent that a plane may turn up at the allotted time and destination – though there are many examples where it does not.
This may explain why passengers arrive on the day and pay rather than committing themselves financially to a journey that may never occur.
“Air travel has such a bad reputation [in Africa]. It is not reliable. So passengers tend to turn up at the airport cash in hand and if the plane arrives they pay,” Winter said.
“This is the culture that exists. It will take a few months to change the culture, give people the confidence that we are here for the long-term so you can pay for the ticket in advance and we will turn up and fly you.”
The internet here in the UK plays a huge role in the way tickets are marketed.
Its impact is likely to be far less significant in Ghana, Angola, Kenya and Tanzania, where mobile phones rather than worldwide web are the dominant communication channel.
Mobiles will be an important route to market, both as a marketing channel and a means of payment, as initially will travel agents and call centres, Winter said. Fly540 already receives mobile payments for flights in Ghana and Kenya.
But creating a market for this low cost offering is just part of the problem. The other potential pocket of lumpy air is the fiscal regime operated in FastJet’s four hub countries.
In Ghana, for instance, the departure tax is something of the order of US$60 for regional flights..
Levies like this blow the low cost model out of the sky.
However, FastJet is in discussions about reducing these fees and has put a compelling economic case for budget air travel.
Independently verified calculations suggest the arrival of budget travel could lead to an increase in the tax take (including fuel duties).
The challenge is persuading the authorities that low cost airlines will act as a magnet for international carriers and their wide-bodied jets that are taxed at even higher rates.
To get it fully airborne, FastJet requires further funding, which will almost certainly be supplied by new equity investors.
Analysts estimate the group will require US$15-30 million. Exactly how much it raises will in part depend on Lonrho and just how far it wants to dilute its stake in the carrier.
The institutional welcome has been reasonably warm as Winter and his team have spelled out in broad brush their aims and ambitions for the group.
Whether this translates into firm interest when the cash call gets underway remains to be seen.
“It’s difficult out there,” said Winter, referring to the turmoil on the world markets and how it has affected institutional demand.
If FastJet does achieve its ambitions, then the investment should prove a very shrewd one.
That targeted US$1 billion a year of revenues might reasonably generate an EBITDA margin of 10 per cent, based on the performance of other operators.
Applying a conservative multiple of eight times that EBITDA you might then have a business worth US$800 million in as little as 36 months carrying very little debt.
“This is a significant value growth story,” Winter said. “We have the opportunity to build a business at many multiples of what it is valued at today.”