African budget carrier operation Fastjet Group is to suspend flights in Mozambique after mounting losses resulting from insufficient demand, which it partly attributes to tougher competition.
Fastjet Group had been concentrating on its operations in Mozambique, South Africa and Zimbabwe after its withdrawal from Tanzania.
But Fastjet Mozambique – which started up in November 2017 – has faced competition from Ethiopian Airlines, which recently established itself in the country's domestic market. Fastjet Mozambique has been using an Embraer ERJ-145 but says it has been forced to "scale down" its route network.
It has also had to cope with the impact on demand from severe weather including the effects of tropical cyclones Idai and Kenneth during March-April this year.
Over the first half of this year Fastjet Mozambique recorded "significantly reduced" revenues of $1.9 million – down from $4.2 million – and relatively heavy operating losses of $2.4 million.
These losses, says the group, combined with "ongoing oversupply" of capacity in Mozambique by other carriers has prompted its decision to suspend all services in the country from 26 October.
It is also stopping its codeshare arrangements with local operator LAM Mozambique Airlines, which had been shoring up its defences.
"We remain committed to Mozambique, will be monitoring the market environment very closely, and expect to return there as and when the situation improves," says Fastjet interim chief executive Mark Hurst.
The company expects costs of $150,000 arising from the suspension decision.
Fastjet Zimbabwe will continue to operate from its base at Harare. The Zimbabwe division contributed $12.1 million in revenues over the first half and cut operating losses to $1.4 million.
The group has been intending to establish a Fastjet-branded division in South Africa from 2020, following its acquisition of FedAir last year.
FedAir was marginally profitable over the first half on revenues of $5.7 million.
Fastjet Group, which underwent an extensive restructuring and refinancing about a year ago, says it had a cash balance of $2.8 million at the end of September.