If there was an award for a company that breaks its own records for losses each month, Air Zimbabwe would win with flying colours.
The national airline has increasingly become a growing burden for its shareholder – the government – which seems to have no idea how to revive it.
This week the Minister of State Enterprises and Parastals, Gorden Moyo, said Air Zimbabwe was in such a shambles and its financial position so hopeless it would be difficult to find takers – even if the government decided to offload it.
“There are certain entities where we think surely government should be out of,” Moyo said.
“But it may not be easy to sell Air Zimbabwe right now, even if you want to offload it. You may not find a taker because of its state,” he said.
Flights cancelled
On Wednesday last week, Zimbabwe’s beleaguered national passenger airline, cancelled several flights – including the Harare-London and Harare-Johannesburg flights – because it could not meet its fuel obligations.
Weighed down by years of mismanagement, poor industrial relations and bureaucratic bungling, a new substantive Air Zimbabwe chief executive will have a daunting task to improve operations at the national airline. Innocent Mavhunga is currently acting CEO.
The airline is heavily indebted and morale among the staff is at its lowest ebb. Frequent flight delays and cancellations, loss of luggage, overbooking and shoddy passenger treatment are regular complaints from travellers. Aviation experts this week said the problems were symptomatic of bigger issues.
“When such things are not in order, human beings tend to display passive resistance. How do you expect someone who has not been paid to smile or offer you a pleasant service?” a senior manager at the airline asked.
“An airline is usually strong at home, but in Zimbabwe a lot of people cannot afford to fly, necessitating a deliberate strategy to grow the market outside of the country’s borders. However, since mid-2007 the contrary happened. Management pulled out of a lot of both profitable and potentially profitable routes, such as Malawi, Dar-es Salaam, Dubai and Nairobi.”
DRC profitable
The airline also briefly ran domestic operations in the Democratic Republic of Congo in partnership with the national airline Ligne Aérienne Congolaises. The DRC operation was described as “costly but highly profitable”, providing the airline with enough liquidity to service its debts and commitments as well as pay its staff.
The pullout was not supported by a strategy to retain market share enough to offset both operating costs and fixed costs. This resulted in extreme erosion of the revenue base, while the cost-base increased along with the attendant spiralling debts.
Among the critical creditors is International Air Transport Association (IATA) which is owed nearly $4 million.
To reduce exposure to the defaulting airline, IATA suspended Air Zimbabwe from its clearing house, which effectively means that the airline cannot feed into other airlines or accept traffic from other airlines through interline arrangements.
Such arrangements mean that Air Zimbabwe cannot sell tickets on behalf of other airlines and vice-versa.
Massive debts
This effectively means the airline can only carry point-to-point traffic, forcing passengers including government officials to shun the national airline in favour of more networked foreign airlines.
“Airline business is all about interlining which makes it easy for passengers to connect and is cheaper for individuals whose destination involves more than one flight as they will hold one ticket. As it stands, Air Zimbabwe is operating like an army of one person,” an aviation source said.
However, aviation experts say Air Zimbabwe was not a total right-off and could still be profitable, if properly managed and a majority stake sold to a financially sound strategic partner.
A recent investigation by parliament revealed the airline was operating on an overdraft, unable to service its planes or retire delinquent debts estimated at $64 million.
The parastatal is said to be operating at a loss of $2 million per month.
Competition
Air Zimbabwe has pulled out of 18 routes from a total of 25 and scaled down on the number of flights per week to “rationalise operations and contain costs”.
While the airline was withdrawing from these routes citing “viability” challenges, its competition has stepped in to fill the void. Kenya Airways now flies to Harare 12 times a week between Harare and Nairobi, while Ethiopian Airlines now flies into Harare daily.
South African Airways also plans to increase frequencies from two to three a day on the Harare-Johannesburg route while the national airline is struggling to operate its two daily flights with regularity and punctuality.
The reduction of routes and frequencies impacted negatively on the utilisation of resources, as the airline still found itself faced with same fixed costs.
“What Air Zimbabwe needs to do is to maintain a reasonable amount of money as maintenance reserve. History has shown that this very same fleet can still be used to offer a decent product operating with regularity acceptable in the industry if well maintained,” said an engineer.
He cited Boeing 737-200s, which are still operational and being used by most companies in South Africa and are said to be in good condition.
“In fact, the airline leases the same equipment whenever they need additional capacity,” insiders said.
A revolving door of chief executive officers has failed to boost confidence. The latest in a long line, Peter Chikumba, left on December 31 last year. He has the distinction of being the only CEO to complete his term of office at the airline.
Post published in: News