The Risk The Fastjet Faces Discussion Paper
FORMATIVE ASSESSMENT 1 [100 Marks] You are expected to provide a solid theoretical concept which will be applied to the situation in the article below. Fastjet to Consolidate African Strategy After Growth in Zimbabwe, Mozambique And Lays Out Strategy After Fine Run Low cost airline, fastjet, says it is to expand its African footprint following robust growth in Zimbabwe and Mozambique during the year ended December 31, 2018. Expansion into Africa will consolidate the regional airline’s growing influence on the continent, where it has been growing connections and frequencies, taking advantage of the collapse of most State-run carriers. fastjet saw its revenue rise 166 percent to US$38,3 million during the review period, from US$14,4 million during the comparable period in 2017, according to a trading update released this week. The group attributes its growth to a 575 percent rise in passenger numbers Mozambique, and 45 percent surge in Zimbabwe, where load factors appeared to defy a volatile currency situation. Ahead of year end, fastjet had rolled out its huge ambitions to network Africa with an investment in the South African headquartered chartering service provider, Federal Airlines in October 2018. Chief executive officer (CEO) Nico Bezuidenhout this week said the acquisition had laid the groundwork for fastjet’s full entry into the South African market The Risk The Fastjet Faces Discussion Paper.
During the review period, fastjet executed “painful” corporate re-engineering processes to give the operation the right frame to face challenges in Africa, including a tricky situation in Zimbabwe where authorities have been failing to repatriate revenues due to foreign airlines now estimated at over US$100 million. Zimbabwe presents an excellent opportunity for fastjet as the State-run Air Zimbabwe has gone bust and has been placed under administration. “In 2018, we took significant and decisive action to right-size the group and ensure the business has a solid platform on which to build future growth,” Bezuidenhout said in a trading update released this week. “Whilst these cost-cutting measures were at times painful, our newly-sized operations provide fastjet with a materially enhanced strategic position to pursue the growth opportunities on offer on the continent. The group concluded its investment in Federal Airlines in October 2018, providing a platform for entry into the South African market,” he said. Federal Airlines is a private charter and shuttle airline. It says over the last two decades; it has revolutionised the way passengers experience private air travel through professionalism and its seamless efficiency. fastjet has entered the aircraft chartering market through Federal Airlines in South Africa “fastjet’s business in Zimbabwe continued to grow during the first quarter of 2019, realising year-on-year revenue growth of 70 percent on the back of a 17 percent increase in output and a 71 percent increase in revenue per available seat kilometre,” the fastjet CEO said. fastjet now accounts for 36 percent of flight departures between Harare in Zimbabwe and Johannesburg in South Africa, from 31 percent in the first quarter of 2018, it now accounts for 64 percent between Harare and Victoria Falls, from 49 percent previously. “Despite the impact of cyclones in Mozambique at the start of the current year and continued fuel protests and currency volatility in Zimbabwe, fastjet is making progress and expects to generate a marginal underlying operating profit for 2019, with further route expansion planned for Zimbabwe in the second half of the coming year, as well as a brand entry into South Africa in 2020,” said the CEO. “During December 2018, competition in the local Mozambique market intensified following the entry of Ethiopian Airlines as a domestic carrier,” Bezuidenhout said. fastjet incurred an operating loss from continuing operations pf $41, 2 during the year to December 31, 2018, from a US$11,2 million loss on continuing operations the previous year. The group’s divesture from its operations in Tanzania concluded in November 2018, resulting in the deconsolidation of US$27,2 million in revenue and US$15,8 million in after tax losses from the group’s continuing operations for the 2018 financial year; future aircraft lease obligations related to Tanzania were terminated. Fastjet said it was riding on a business model that extended beyond its low-cost airline tag to dominate domestic and regional networks. The airline, which operates domestic and regional frequencies in Zimbabwe, said its strategy combined budget carrier principles and value-based fares, which resonated with its regional markets The Risk The Fastjet Faces Discussion Paper.
In a statement, fastjet shared glimpses of the work that goes behind its operations in Zimbabwe and beyond after it was awarded the title of Africa’s Leading Low-Cost Airline at the World Travel Awards. “We are ecstatic with our latest win, and we extend our sincere gratitude to our customers, industry regulators, travel partners and staff for their support and encouragement,” the airline said. “Having listened and acted on feedback from our loyal customers, we have over the years, adapted our business model, evolving to our current business model, which while still retaining low-cost principles extends inclusive value-based fares and new travel opportunities. Our fifth consecutive award, in particular during this very challenging year, reaffirms our motivation to deliver outstanding services while introducing new travel norms with a firm commitment to combatting the spread of the virus, increasing traveller confidence, as we continue to promote existing and new business and leisure travel and tourism opportunities in the markets we serve,” it added. The World Travel Awards acknowledges and celebrates excellence across all key sectors of the travel, tourism, and hospitality industries and is regarded as one of the most prestigious, comprehensive and sought-after awards in the global travel and tourism industry. “To be voted for the fifth consecutive time as World Travel Award winner is an accolade which many strive for, and is testament to the fact that fastjet, is consistently recognised and acknowledged by its loyal customers and travel partners,” the airline added. Following a difficult year in Zimbabwe highlighted by the grounding of flights in order to fight the spread of COVID-19, fastjet was the first airline to return to the skies together with Air Zimbabwe. This was after government relaxed air travel restrictions imposed in March in a bid to kick-start tourism operations. The airline operates frequencies between Harare and Bulawayo, Harare and Victoria Falls and Harare and Johannesburg in South Africa. African Union (AU) said the COVID-19 pandemic had inflicted significant damage on the continent’s airlines and aviation authorities. “It is projected that African airports will experience revenue loss of 51% for the year 2020 due to restrictions introduced on aviation activities, with the loss estimated at US$2,2 billion as per analysis released by Airports Council International. Revenue losses are currently estimated to be over US$8 billion for African airlines. Furthermore, liquidity challenges and fluctuations in foreign currencies have resulted in job losses to African airlines, airports and other strategic institutions and pillars that drive air transport’s contributions to the African economy,” AU noted. Adapted from: https://www.newsday.co.zw/2020/11/fastjet-lays-out-strategy-after-fine-run/ [Accessed February 2022] https://enn.news/economy/fastjet-to-consolidate-african-strategy-after-growth-in-zimbabwemozambique/[Accessed February 2022] The Risk The Fastjet Faces Discussion Paper
Consider the nature of business that Fastjet is in. Discuss the types of risk the airline faces; in addition, discuss the responses that Fastjet may employ to deal with those risks.
Reference to the article is expected
A solid theoretical context on the concept is expected – strategic focus is risk
Consider how Fastjet should respond to risk
Specific examples around fastjet should be provided
The Risk The Fastjet Faces Discussion Paper