Source: How to extricate sinking AirZim | Daily News
LATE last month Air Zimbabwe (AirZim) confirmed its plane’s departure from the Robert Gabriel Mugabe International airport was delayed because it had developed a technical problem.
Plane delays and postponements are not uncommon at AirZim as the airline has experienced numerous challenges over the past two decades. Despite all their challenges, we must give the national airline credit in terms of continuing to operate in a very tough geo-political environment.
Make no mistake, the African market demand overall is high in volume domestically and regionally, however, the core problem is the low yields in the face of increasing competition. This is especially true in the Visit Friends and Relatives (abbreviated VFR) markets.
The International Air Transport Association (Iata) has already forecasted that African Airlines are to make a loss of more than US$300 million in 2019, which is in stark contrast to the rest of the global airline industry that is forecasted to make a net profit of US$32,3 billion.
The region benefits from higher-than-average yields and lower operating costs in some categories. However, few airlines in the region are able to achieve adequate load factors to generate profits.
In 2016 the African airline industry was recorded as having the safest year for flights in a decade.
According to figures from the Iata, there were no passenger fatalities in sub-Saharan Africa in 2016 and no jet hull losses, with an accident rate of 2,30 per 1m departures, in comparison with an average of 9,73 over the previous five years. However, we cannot ignore the fact that safety concerns continue to be raised over specific African carriers within the continent.
In view of all of the above, the launch of the Single African Air Transport Market (SAATM) by 23 African States in 2018 to open the African skies connectivity was welcome news to the African continent and has given hope to ensure that passenger growth can continue and the revenue loss of a number of national African flag carriers can be reversed.
Below are some ideas on how Zimbabwe can implement a quick fix solution for AirZim which will cost some money in the short term but will have long term cash saving benefits considerably:
Strengthen the regional and domestic market before contemplating flying long-haul
UM fleet of 767-200 ER and the 737-300 ER to be grounded by end of the Iata W20 i.e. 24 March 20. They can lease this aircraft or sell the fleet completely. A tender placed immediately to dry lease the A321 NEO. This aircraft will deliver per seat fuel improvements of 20 percent along with the additional range of up to 500 nautical miles/900 km or 2 tonnes of extra pay load. In any disciplined airline environment, fleet standardisation is a key driver in reducing costs and increasing profits.
Review the schedules completely. There is no point in flying aircraft with low load factors. AirZim needs to work with other carriers on reciprocal arrangements to transfer passengers in case of cancellations. However, we cannot ignore that foreign carriers need to be assured on strong robust government policies on funds repatriation i.e. Airlines should be allowed to remit funds to their home markets and currencies should be freely convertible at market exchange rates.
AirZim must lobby the government to restrict access to competitors who have taken away a lot of the market demand by dumping too much capacity together with offering sometimes predatory low fares on key segments.
Look at successful business models such as the SwissAir model of completely shutting the airline and re-emerging under a new name and starting afresh with a clean balance sheet which has no legacy debt.
For this to happen the government must take the difficult decision and absorb all AirZim losses and debts. There are many other ideas that can be implemented by AirZim to clear their debt.
Zimbabwe-born Mambara, who has a demonstrated history of working in the airlines/aviation industry, is currently the country manager (UK and Ireland) for Royal Brunei Airlines.
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