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Sir Stelios's Fastjet Gears Up For Fight With Aircraft Owners Over Debts And Safety Claims

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SIR STELIOS FASTJET
Trouble ahead for Sir Stelios's Fastjet as the former aircraft owners claim debts and licences haven't been agreed | Fastjet

Fastjet, the African low-cost carrier led by Sir Stelios Haji-Ioannou, is involved in a war of words with Fly540, the original owners of its fleet of aircraft.

On Wednesday morning, Fly540 issued a statement saying it was forced to withdraw the licenses acquired by Fastjet after it had "failed to comply with the respective licence agreements".

The dispute centres on an alleged outstanding payment for the licence and other fees for the Fly540 Tanzania, Angola and Ghana brands, failure to disclose financial information for December 2012, failing to provide safety assurances to Fly540's head of safety and failure to provide evidence that Fly540's quality systems are in operation

Fly540 claims Fastjet's Africa operations failed to respond to its lawyers' enquires, and now it will tell Fly540 Angola and Fly540 Ghana to re-paint their aircrafts in a neutral colour.

Its also demanding that all of the sales offices are rebranded to remove any reference to Fly540. Don Smith, chief executive of Five Forty Aviation, said in a statement that he had "no choice but to take this action".

In response Fastjet's chairman David Lenigas furiously denied Smith's "false and damaging" allegations, adding that the airline was preparing to take legal action against him should he not cease and desist.

"Fastjet has paid Don Smith and his partners well in excess of US$6 million for their interest in Fly540 and associated brands and we will now aggressively seek to have our purchase contracts enforced," said Lenigas.

"The company will not tolerate coercive and underhand practises. Issues created by Don Smith in Kenya have not and will not affect Fastjet's overall plan of becoming Africa's first pan-continental low-cost carrier."

In addition, Fastjet recently discovered it had been exposed to previously undisclosed debts of Fly540, forcing it to negotiate with creditors at a crucial time for the young airline.

Fastjet is working closely with creditors to reach a satisfactory conclusion for all parties involved," said chief executive Ed Winter.

"We do not agree with the amounts mentioned in recent press articles are and where amounts are recognised as owing do not deem them significant in relation to the business as a whole. These isolated issues are not affecting the day to day operations of fastjet or any of our operations in Angola or Ghana that fly under a separate Fly540Africa brand."

Fly540's dispute not the only one Fastjet faces; Canada-based Avmax Aircraft Leasing has written to FastJet saying it is removing the registration of a CRJ aircraft that was leased by Don Smith for Fly 540 in East Africa. The trio of aircraft, flying under the Fly540 brand, have allegedly run up unpaid leasing and maintenance bills of almost $2m (£1.3m), according to a report in the Telegraph.

In a statement FastJet denied it owed Avmax anything, saying: "There has never been a contractual arrangement between Avmax and Fastjet and therefore Fastjet does not owe any money to Avmax. Don Smith, through Fly540 in East Africa entered into contractual relationships with Avmax and under these commercial arrangements owes money to Avmax for unpaid aircraft lease rentals and maintenance reserves."

Established in 2006, Fly540 has a fleet of 10 aircraft operating from four regional bases in Kenya, Tanzania, Angola and Ghana. FastJet began its rebranding exercise of the Fly540 craft last year.

Sir Stelios's easyGroup Holdings owns 5% of FastJet and has the option to acquire another 10% at a price of 5.2p per share until 2 August 2014. Sir Stelios is also a consultant and the brand license owner of the airline.