17 April 2018

Zimbabwe: Air Zim Feels the Heat

Air Zimbabwe, whose management has been publicly attacked by Government for mismanagement, says it will be on the road to recovery once it has fully implemented its strategic turnaround plan to be roled out starting this year until 2020.

This comes after Government announced last week that it will only support Air Zimbabwe if management demonstrated ability to turn the business to profitability.

Finance and Economic Development Minister Patrick Chinamasa said this while launching the first of the four Boeing 777s acquired from Malaysia.

The aircrafts have been leased to Zimbabwe Airways, an aviation firm owned 100 percent by Government, given the challenges dogging Air Zimbabwe.

This is despite the fact that Air Zimbabwe's name featured prominently during the negotiations to purchase the aircrafts from Malaysia.

In emailed responses, Air Zimbabwe's head - corporate services Mr Tafadzwa Mazonde told The Herald Business that the strategic turnaround plan has the capacity to transform their operations.

The turnaround plan is anchored on acquiring smaller aircrafts, to ply mainly the domestic and regional routes, and cut costs currently inflated by the use of long-haul planes.

Mr Mazonde said they were planning to use the Embraer ERJ 145 aircraft in the operationalisation of the "hub and spoke network", which underlines the plan.

"The smaller Embraer aircraft will be used on the domestic and regional routes while the bigger aircrafts will ply the long-haul inter-continental flights," said Mr Mazonde.

Aviation experts and Air Zimbabwe management concede that the airline urgently requires "new, right-sized equipment" in the mould of 50-seater Embraers.

The use of long-haul planes on domestic and regional routes has been blamed for high operational and maintenance costs for the airline, which currently operates two aircrafts.

Further, Mr Mazonde said to ensure the success of the strategic plan, it is critical to reduce employment costs.

This has since been achieved through a retrenchment and restructuring exercise embarked upon last year, which has resulted in employment costs going below 30 percent of the average $2,6 million monthly revenue.

Crucially, Air Zimbabwe has also hired 14 permanent managers, down from the previous 28, all of whom were in acting capacities.

The frantic efforts by Air Zimbabwe management are an attempt to extinguish the negative perception that Government has over the running of the company following successive years of loss making.

Minister Chinamasa last week said Government requires a "strong airline, with strong management", so as to attract more tourists and businesspeople into the country.

National airlines across the globe tend to make operational losses, but are bailed out by Governments since most of them generate money for the country through bringing in tourists and businesspeople.

However, Air Zimbabwe has been accused of drawing funds from Government annually without bringing any tourists since it has largely been limited to domestic routes due to lack of aircrafts and the fear of being impounded.

In December 2011 a Boeing 767-200, was seized by American General Supplies after landing at London's Gatwick International Airport over $1,2 million debt.

Minister Chinamasa admitted that Air Zimbabwe was "on its knees" and had to develop a "credible business plan" before it can be allowed to operate the planes acquired from Malaysia.

He added that Government could not continue pumping more financial resources "into a bottomless pit" as that would not help them achieve the goal of establishing a strong airline.

Air Zimbabwe is reeling under a legacy debt of over $330 million, which has made it unattractive to potential suitors.

Government is determined to get rid of non-performing parastatals and a plan was announced last week which will see parastatals with recapitalisation plans such as NRZ pressing ahead while others will be liquidated, privatised, partially privatised, merged and absorbed as ministerial departments.

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