CASE STUDY TWO -Fastjet suspends Mozambique flights -

Fastjet plc has confirmed that from midnight on Saturday 26 October 2019, that Fastjet Mozambique will suspend its flight operations in Mozambique. This will include flights under its code-share arrangements with LAM Mozambique Airlines.

As detailed in Fastjet's 2019 Interim Results announcement and April Trading Update, competition in Mozambique began to intensify at the end of 2018 with the market entry of Ethiopian Airlines as a domestic carrier.

This increase in aircraft and capacity supply, coupled with two category 5 tropical cyclones at the beginning of 2019 which suppressed passenger demand, led Fastjet to scale back frequency on routes and to reduce overall capacity in Mozambique. As a result, Fastjet Mozambique reported significantly reduced revenue of US$1.9m in the first half of 2019 (H1 2018: US$4.2m) out of total revenue for the Group of US$19.7m.

Following continued losses and the ongoing oversupply of available seats by other carriers, Fastjet has decided to suspend all flight operations in Mozambique.

It is expected that costs related to the suspension of flight operations in Mozambique including refunds will amount to around $150k.

However, Fastjet remains committed to returning to Mozambique once demand for air travel in the country increases sufficiently compared to capacity supplied.

The suspension of flights in Mozambique does not affect any of the operations of Fastjet Zimbabwe, the leading airline brand in Zimbabwe, which continues to operate between Harare, Johannesburg, Bulawayo and Victoria Falls. Cash balances as at 30 September amounted to US$2.8m.

Mark Hurst, Fastjet Interim CEO said: "The detrimental financial impact of ongoing supply and demand challenges means that suspending our Mozambique operations is the right course of action at this time. However, we remain committed to Mozambique, will be monitoring the market environment very closely and expect to return there as and when the situation improves."

Bizcommunity. (2019) "Fastjet suspends Mozambique flights". Available from: . [Accessed on 28 October 2019]

QUESTION 2.1

If customers consistently experience satisfaction in their dealings with a service organisation, it should lead to customer loyalty. List and discuss the steps Fastjet should follow to ensure customer satisfaction and loyalty amongst their target audience in Mosambique. (10 marks)

QUESTION 2.2

Customer loyalty will lead to customer retention, discuss how customer retention can increase company profits- an approach Fastjet may want to consider?(5 marks)