Swift action on Airzim please!

experienced or heard of the kind of fall and stutter that has become the order of the day at Air Zimbabwe.
Last week one corporate leader told me they had been stuck on the Air Zimbabwe plane at the OR International Airport in Johannesburg, South Africa, after being detained because of an Airzim debt. Only after about two hours or so were they released. It is embarrassing to note that passengers had to be ferried in trucks from the parking bay at the airport because the ground services firm is owed some money.

Who is not owed by Airzim? Even regular fliers and prospective customers are owed proper, efficient and reliable service by the national carrier.
Now we hear the plane is not even flying to Johannesburg currently. Wow! Does this story ever end? Does Air Zimbabwe rise each time it falls or does it continue to fall further and further down into oblivion? Does it have the capacity to rise now or it will need significant help to get back to its feet?

In October I wrote an instalment on challenges at the airline and only last week I met Homelink chief executive Mr Allen Choruma at some function and he said I had ended the debate prematurely and advised me to keep it alive one more time. I obliged.
He gave me the impression, which I already had though, that the Air Zimbabwe issue must be kept alive until something is done about it.

Must it be declared a national disaster so that it gets the requisite attention before it sinks to levels that are beyond redemption? Where is the Confederation of Zimbabwe Industries, the Bankers’ Association of Zimbabwe, the Zimbabwe National Chamber of Commerce, the Zimbabwe Council for Tourism, the rest of the Business Council of Zimbabwe membership, and the Professional Women Executive and Business Women’s Forum (Proweb) and all stakeholders who should convene emergency meetings to resuscitate the airline?

We have shouted our voices hoarse on the need to come up with a proper strategy that will rescue the airline and keep it afloat.
Are we saying as a nation we have failed to handle the challenges at Air Zimbabwe or are we taking our sweet time when what is needed at Airzim is swift action!
Time is not on our side.

Below is Mr Choruma’s response on the October 20 instalment and another from a gentleman closely associated with the airline.
Hie Vic my dear sister
Nice article on Air Zim. Surely, all those CEOs who have been fired could not have been all that dumb. Something else is wrong and you hit the spot; poor corporate governance. You know when I travelled to Singapore in 2008 for Christmas, my son, a fare-paying customer, had to be shifted from his seat because they had to accommodate a staffer’s wife (who only pay 10 percent of the fare) who had a little child.

This annoyed me as my two kids ended up sitting separately on the flight. I remember, the captain on the flight, who I will not name because I know him well, also had his wife and two kids on the flight.
Vicky, I would say on that flight close to 30 or so passengers were staffers’ beneficiaries. Then there are retired directors, managers, pensioners, who also get discounts.

I have a sister, who “resigned”, not retired, from Airzim more than 15 years ago who still pays the 10 percent. When I visited my aunt’s house a few weeks ago, I enquired when she had last visited from London. The sister told me she had come to Zim some few months ago “because she gets a cheap (discounted) ticket on Airzim”.
Imagine the financial haemorrhage and its impact on Airzim’s bottom line? What more goes on that we don’t know?

Vicky, this is why the airline won’t make money. You can get the latest aircraft, i.e. Airbus aircraft, a 380 Double Decker, or the Boeing Dreamliner, but as long as the governance issues are not sorted out, they will all be parked and rust in the sun (just like the electrical locomotives at Dabuka Gweru which now look white yet they were deep yellow) and the airline will still be making losses.

I can’t even apply to be a CEO at Airzim, though I am competent to do so. My wife and kids will go hungry as I will be fired in no time.
God Bless.
Allen Choruma

Another wrote:
Hie Vicky
You article is very accurate. Even if you bring Richard Branson with no capitalisation and interference he will be blamed for incompetence.
It would be interesting to look at the qualifications of those in Government supervising Airzim.

Below are examples of how governments have moved in to assist airlines that have found the going tough over the past few years. Zimbabwe has a thing or two to learn.
The aviation industry worldwide has experienced serious operational challenges over the last 10 years which culminated in the industry posting losses of US$68 billion by 2009. The past decade has been described by the IATA secretary-general as a “decennis horribilis”, a horrible decade for aviation.

Key challenges included the September 11 attacks which resulted in increased insurance premiums, rising fuel and oil prices, declining yields, Sars, H1N1 and H2N2 pandemics and, above all, the global financial crisis in 2009. As a result, a number of airlines went into bankruptcy, among them Swissair and Sabena.

Others such as Air Canada, Delta, Northwest, US Airways and United Airlines went into bankruptcy protection in order to survive up to this day.
Government bailouts

The role of airlines includes but not limited to facilitation of movement between countries and within countries, in the process supporting downstream industries like tourism, industry and commerce. In recognition of the importance of aviation to their national economies, several governments have taken the deliberate decision to prop up their national carriers through substantial government bailouts. The following are some of the airlines that have received government support in the last 24 months:

South African Airways
In financial year 2006/2007 SAA received ZAR1,3 billion in fresh capital and an additional ZAR1,56 billion was injected into SAA in 2007/2008 to assist with restructuring costs.
Reports suggest that the real requirements in 2007 was for ZAR8 billion, but the government declined to provide the total amount sought. Even before the current economic downturn, SAA was relying on the support of government bailouts to help its restructuring efforts.

The funding eventually agreed upon was in the form of a subordinated loan with a guarantee provided by SAA’s shareholder, the Public Enterprises Department. The loan has been classified as an equity instrument and any interest SAA elects to pay is classified as dividends. SAA paid dividends of ZAR137 million in 2007/08 relating to the subordinated loan.

SAA remains undercapitalised, with a large debt burden, and the turbulence of the past 12 months has prompted the airline to seek a further ZAR5,2 billion capital injection. Privatising SAA as sought by others is not an option for SAA at present as there would be few, if any, likely suitors in this environment.

Nigeria
Various airlines under the umbrella of the Airline Operators of Nigeria recently asked the Federal Government of Nigeria to extend a financial lifeline to them. In a position paper to the Nigerian president, the operators said normal bank facilities could not prop the airlines to greater heights. In the light of this, they appealed to their government for a special financial package to the airlines that had to carry very low interest rates, coming with extended payment periods.
Their appeal highlighted the need for the Federal Government to appreciate what governments in other countries are doing, especially given the recessionary times that are currently besetting the global economy.

Federation of Indian Airlines
In a show of solidarity, eight of India’s cash-strapped private airlines in Mumbai under the banner of the Federation of Indian Airlines in August 2009 did not operate domestic flights demanding a bailout package from the government and threatened to suspend their services indefinitely if this was not done urgently.

Air India
The Indian government has approved an injection of US$173 million for the ailing national carrier, Air India. The instalment is part of an expected US$432 million financial aid package for the airline that has reported massive losses in recent years.
The airline reported a loss of US$875 million in the fiscal year ending March 2009. Air India would be given this bailout on the condition that the airline cut costs dramatically.

China
Air China, China Eastern and China Southern otherwise referred to as the Big Three, posted a collective loss of US$4 billion in 2008. Some factors were beyond their control, but were also guilty of failing to rein in costs and aggressively trying to grow market share at the expense of yields.
All three once again turned to the Chinese government, their main shareholder, for a bailout. China Eastern and China Southern got the bailout. The Chinese government has done a lot to help airlines overcome the economic crisis over the last 18 months.
There are various methods being employed and rules are being relaxed to stimulate the aviation industry. It is authorising tax breaks for its airlines as further evidence emerged of the industry’s troubles amid the global economic crisis. The government has promised to inject 10,5 billion yen into airlines. The finance ministry exempted airlines from paying fuel surcharge taxes for three years.

Japan
Japan Airlines won emergency loans from a state- owned bank following the September 11 2001 terrorist attacks, the Sars outbreak and again last year as Japan suffered its worst post-war recession. Japan Airlines has at least US$16 billion liabilities and has been bailed out three times in the past nine years. By end of 2009, state-owned Bank of Japan had given Japan Airlines 200 million yen of credit lines so as to ensure that it is at least kept flying.
The requirements for Japan Airlines currently stand at 700 billion yen of which 400 billion yen is a credit line requirement while 300 billion yen is capital injection. Bankruptcy is the best way to ensure a speedy recovery for the airline.
However, Japan Airlines has opposed bankruptcy on concerns that it would deter passengers from flying the airline and insist that a government bailout would not deter investors. Creditors will be asked for 350 billion yen in debt waivers and debt for equity swaps.

United States
After the September 11 terrorist attacks, Congress propped up the ailing airline industry with US$5 billion in cash payments for lost revenue while the airspace was shut down, insurance guarantees and liability protection and a US$10 billion loan guarantee programme. These bailouts have worked although the bailouts were controversial at the time.
The Air Transport Stabilisation Board rescued America West Airlines and US Airways Group Inc. and helped facilitate a merger of the two. That move saved tens of thousands of jobs and kept a big competitor in the air. Without the loan guarantees, both airlines likely would have been liquidated before they got the chance to merge. The programme achieved its goal, stabilising an industry seemingly in a death spiral did it without costing taxpayers.

Zimbabwe
Air Zimbabwe is vital to our economy and its collapse would be devastating at a time when our economy is showing all the positive signs of recovery. Last year Professor Geoff Lipman, who was at that time the Assistant Secretary-General of United Nations World Tourism Organisation, identified Air Zimbabwe as the crucial link in the recovery of the tourism industry in Zimbabwe.
In God I Trust!