Airzim fares raise viability questions

ZIMBABWE’S national flag carrier Air Zimbabwe (AirZim) recently slashed fares for its regional and domestic routes, raising questions about the viability of the move at a time when the airline is struggling to avoid collapse.

Hazel Ndebele

The current pricing promotion, which is running concurrently with an extensive restructuring and transformation exercise, is widely seen as an attempt to lure back customers who had conveniently switched to other airlines.

A snap survey by businessdigest indicates people travelling to Bulawayo and Victoria falls have in the recent past resorted to flying as it is much cheaper and faster compared to driving long distances.

For instance, flying to Bulawayo from Harare is mere US$105 for a return ticket compared to up to US$80 return ticket on a luxury coach.

Hospitality companies with operations in Bulawayo and Victoria Falls like African Sun Ltd and Rainbow Tourism Group recently said AirZim’s presence in the domestic market and the latest promotion has improved business for their hotels.

While the traveling public is benefitting from the promotion, the question remains whether or not AirZim will get anything out of the move in the long term.

In an interview, AirZim spokesperson Shingai Taruvinga this week said the company’s load factor had improved significantly following the fare reduction.

“The promotion has so far been successful hence we have doubled our domestic frequencies. We want the public to always consider flying as their best means of transport,” said Taruvinga.

“Most importantly we want everyone to get used to flying and get to experience the efficiency and reliability of the airline as we are leaving on time for all our flights as compared to the past so that our customers do not hesitate to travel with us.”

Analysts however say the reduction of fares will instead sink AirZim into the financial doldrums further. AirZim has a strangling US$190 million debt.

Aviation sources who requested not to be named said the two airbuses which the company leased are more than 20 years old and generally more expensive to maintain.

The sources added fuel consumption was high in older planes, increasing costs for an airline keen on clawing back market share.

A price penetration strategy, a source said, seems perfect on the surface but internally the airline usually suffers the consequences in the form of recurrent losses.

According to information gathered by businessdigest, of the two Airbus A320s that have recently been added to AirZim’s fleet, only one has recently undergone safety inspections and certified to operate on regional routes such as Harare-Johannesburg.

Before the over 20 year old planes were acquired, AirZim acting chief executive officer Innocent Mavhunga was quoted saying most of the airline’s aircraft had recently been grounded over safety concerns with most of the planes feared to be past their sell by date.

Mavhunga said it costs US$410 000 a month to lease the two planes. It is understood that the national airline is leasing its Embraer jet with a South African company and is paying US$258 000 per month at a minimum utilisation of 120 hours per month.

Air Zimbabwe’s new board chairman Ozias Bvute said the nation should not worry too much about the issue of debt.

“We would like the airline to do well and that is what we will look towards; the debt becomes secondary,” he said.

“In terms of money we are technically bankrupt, but the commitment of our major shareholder and technical skills are better than most other airlines in Africa.”

Addressing journalists recently, Bvute said the airline, which recently resumed its traditionally viable Harare-Bulawayo-Victoria Falls and Harare-Johannesburg routes, had taken a position to send its workers on forced leave until the company’s performance improves.

“We are not in a position to conduct retrenchment. We have put people on temporary leave. We are currently traveling to South Africa and the domestic routes so it would not make business sense to have a full staff complement to service these few routes. We have asked our staff to go on leave,” he said.

Bvute said the recent introduction of the two Airbuses had reduced operational costs by 45% for the company.

Speaking of the readiness of the airline for the United Nations World Tourism Organisation (UNWTO) which will be co-hosted by Zambia and Zimbabwe from 24-29 August, Taruvinga said they have increased flexibility throughout the region and beyond Africa.

“We are ready for UNWTO and we will very soon resume the Johannesburg-Victoria Falls flight to cater for those who want to travel from South Africa for the event,” she added. “For this event the airline will be able to promote tourism and be a catalyst for economic growth, this is a unique marketing opportunity for the country.”

Zimbabwe Tourism Authority (ZTA) CEO Karikoga Kaseke said the slashing of flight fares is a re-entry point for the airline. “When you want to re-enter a market you cannot enter with high costs.

However, they must re-brand the airline, people might just go because they are charging cheap prices and not because of the services therefore they must re-assess and re-brand themselves,” he said.

“In the past Air Zimbabwe was winning prizes year in year out but this was because they had stiff competition from other airlines as 38 airlines were coming into the country in 1996,” he said
“The government is killing the airline by protecting it, this will only make the airline relax instead of thinking of innovative ways to improve their service and new ways of marketing their product.

Competition is good for any airline that is worth flying.”

According to Zimbabwe Tourism Authority (ZTA) report for the period ending December 31, 2012, challenges at the national airline severely affected the market share of the airline which dropped from 8,8% to just about 0.7% in last year.

This resulted in other airlines taking advantage to increase their market share.

 

Comments are closed.

Top