AirZim set for unbundling, retrenchments

FZ:What is government doing to revive the national airline?

NG:Air Zimbabwe has been operating on a deficit since 1994 but the inception of the multi-currency system worsened the situation. This has resulted in frequent strikes, grounding of operations, non-replacement of equipment, huge debts, suspension from Iata, lease withdrawals and contract cancellations, among others.

In light of the above challenges, the airline’s viability was greatly compromised hence the call by the government to come up with possible solutions to the challenges and measures to ensure resumption of the flights by the airline.

My ministry has engaged the Ministry of Finance with a view to secure funding to meet some of the pressing challenges at Air Zimbabwe. To address this, the government financed the following:

Payment of Lufthansa technical for the repair of a Boeing 767 aero engine;

Payment of Aviation Insurance for the first quarter of 2010;

Payment of a lease deposit for the airline from Air Zambezi although the company terminated the contract and
The government has resolved the following:

Pay the Air Zimbabwe debt;

That the airline be right-sized into a lean and effective organisation through a process of retrenchment to be financed by government;

That the process to hive off the National Handling Services be expedited and;

That steps be taken to secure a strategic partner to enter into a venture arrangement with government for the running of the national airline as a matter of urgency.

FZ:Why do you think the unbundling of Air Zimbabwe will result in a viable and profitable airline? Where has this happened successfully, regionally and internationally?

NG: An earlier attempt at restructuring Air Zimbabwe saw the birth of the following strategic business units that were meant to improve the Airline’s operations: Air Zimbabwe Passenger, National Handling Services, Galileo — a Computer Reservations Company, Air Zimbabwe Cargo and Air Zimbabwe Technical.

Air Zimbabwe Holdings has both unwarranted structure and bloated workforce which has had negative impact on its resource base. In relation to this and with reference to the corporate structure, there is need for rightsizing of Air Zimbabwe Holdings to a suitable structure which is anchored on technical partnership. In similar vein, a phased retrenchment exercise is unavoidable.

We have learnt lessons from airlines such as South African Airways, Ethiopia Airlines and Kenyan Airlines to name just a few, where restructuring paid dividends. Once unbundled, Air Zimbabwe will be streamlined and become efficient.

FZ: Give us the Air Zimbabwe debt profile and how government intends to retire it?

NG: The estimated debt for Air Zimbabwe is around US$149 million.  Foreign creditors are owed about US$30 million, and the rest is owed to government parastatals, such as Zimra and Nssa.

Air Zimbabwe’s debt is going to be taken over and warehoused by the government, that is the Ministry of Finance.

FZ:  What do you say to Air Zimbabwe’s staffing levels?

NG:Air Zimbabwe has a bloated workforce of about 1 400 employees against an ageing equipment and operational assets. The equipment is old and faces breakdown, revenue earned through this equipment does not match the expenditure levels of Air Zimbabwe. Therefore, there is a compelling need for retrenchment since Air Zimbabwe is always having a huge deficit.  There is need for a retrenchment exercise, starting with those that have agreed to be retrenched. These now stand at 94 employees requiring almost $4,2 million. A total retrenchment for phase 1 is estimated at $11,5 million.

FZ: Aviation critics say government was largely to blame for the state of affairs at Air Zimbabwe because (1) it failed to recapitalise the company when we adopted multi-currencies; (2) or lease a new fleet of planes and (3) government ministers and officials did not pay for their flights and commandeering of planes. What is your reaction to this assertion?

NG:Most critics that you were referring to were  expressing their opinions without having facts on the ground. It should be noted that the transition to multi-currency system meant that the source of funding from government through the budget dried up and Air Zimbabwe was left to fend for itself. Government had no resource base, this was a national problem and we started operating from a cash budget. There is no government minister or official that owes Air Zimbabwe anything. There is nothing like that, all government officials were paying for their flights. Let me state categorically that no minister has authority to commandeer Air Zimbabwe, even myself as minister, I don’t have that authority.

Those who allege that ministers or officials owe Air Zimbabwe is a euphemism to try to refer to the Office of the President and Cabinet. However, it should be noted that the chartered flights by the president have always been fully paid for in advance, thereby contributing significantly to Air Zimbabwe’s revenue.
FZ:Will the new Air Zimbabwe, you referred to, seek a strategic partner? What will be the shareholding structure?

NG:Of course, yes, there is need for a strategic partner for the Airline and the process to find one is currently underway. It is envisaged that proceeds from the strategic partner’s equity contribution would be used to liquidate the assumed debt or a portion thereof. There is need to involve either a national or regional advisor from the start as there is no capacity in the public sector to handle such transactions.

A strategic technical partner would assist in the process of re-equipping the Airline particularly in respect of short haul aircraft to replace the three aged Boeing 737-200 aircrafts and a long haul aircraft to complement the two Boeing 767-200 aircraft.

The shareholding structure will be determined by strategic partners’ equity contribution.

FZ: Are you to blame for Air Zimbabwe’s woes?

NG:  I don’t normally pass the buck or blame anybody for the problems that we may be facing. I take full responsibility as the minister in charge for whatever happens in my ministry.

 

Next week, Goche will speak on mobile service providers and on the state of the country’s roads.

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