FLAG carrier Air Zimbabwe (AirZim) is at crossroads. Since releasing its turnaround strategy last year, the board and management have been making frantic efforts to reconfigure the company’s capital structure, modernise systems and re-engage the company with international airline regulators like International Air Transport Association (Iata) and European Aviation Safety Agency (Easa). For almost a decade, the state-owned airline was not subjected to an external audit. The current board has since instituted backdated external audits covering the period when the company became technically insolvent due to mismanagement, interference and rampant corruption. Zimbabwe Independent reporter Nyasha Chingono (NC) sat down with board chairperson Professor Chipo Dyanda (CD) to explain the parastatal’s turnaround strategy and how AirZim plans to manoeuvre the headwinds to avoid crash-landing or crashing. Below are excerpts of the interview:
NC: Has the shareholder, the government, welcomed the turnaround strategy and are you getting the support you anticipated when you embarked on this journey?
CD: We did a restructuring exercise last year, but we were advised that there is another restructuring coming up. We then did the turnaround strategy and asked for a response from the shareholder. We completed the document and asked for a launch.
This has not happened yet. We have been working with the turnaround document for almost a year now and we had workshops with stakeholders, who told us what their expectations were and came up with a document.
NC: Your turnaround strategy hinged on having a competent management team. Why has AirZim failed to employ a substantive chief executive officer (CEO) and a chief operating officer since late last year? What are the sticking issues?
CD: As for the COO (chief operating officer), we found a replacement, but we have not yet gotten a response from the ministry. We were in the process of employing a CEO, but since we do it in conjunction with the shareholder, we flighted an advert and carried out some interviews, but when we were supposed to go to the second stage, we were told to suspend the process pending restructuring of AirZim. So we did our part a long time ago. These are executive positions; we do everything in consultation with the shareholder.
NC: Why has the airline failed to produce financial reports since 2009 and what has the current board done to rectify this corporate governance failure?
CD: We have started to implement that which we can within the capacity of the airline. The major issue that is stopping us from implementing is equipment. Everything else we have done. For example, when we were appointed in 2013, AirZim was not doing external audits. When the board was appointed, we found outstanding audits from 2009. We have since done audits for 2009, 2010, 2011 and 2012, now we are doing 2013 to 2016 with the limited time that we have. By December, we should have cleared all the audits. I don’t know how it happened that the airline would go for almost 10 years without an audit. Since the adoption of multi-currency, there has not been any audit.
The 2017 audit should be done by January next year. We have also done restructuring, where we cut staff by 50% because the staff was bloated. We have also restructured the departments so that they are efficient. We also now have substantive management here except for the COO and CEO positions. So everything that needs to be done, we have done. That company is now clean. If it can only get support, we will be profitable. The reason why audits were not being done was because systems had collapsed. But they are now up and running again. If we had not taken care of the systems, we would not have done audits. We are doing the audits and they are showing challenges with the systems. We have requested for an AGM (annual general meeting) for 2009 to 2012.
NC: What is the relationship between AirZim and Zimbabwe Airways (ZimAirways)?
CD: There are no relations between us until government does the merger which it is talking about.
NC: There are reports that government is mulling a merger between AirZim and ZimAirways. How do you plan to implement your turnaround strategy in the new regime?
CD: That you have to check with the minister. Maybe that is the impending restructuring, I don’t know. But as AirZim we are working flat out and it’s ticking. I know that when people are talking about AirZim, they talk about an AirZim of yesteryear, it’s very different now.
NC: AirZim has been failing to compete on both the domestic and regional routes due to lack of capacity. What are your recapitalisation requirements according to the turnaround strategy?
DC: The equipment is the major problem and the shareholder is seized with the matter. If they can give us the appropriate equipment, we should be able to run with that strategic plan. The amount of money that we need is not much and if we are equipped we should be able to fund the other sections of the turnaround strategy. We needed two small Embraers to do the regional and the local. We need to strengthen the business in the country. We have two 767s which can do long haul. They are long haul aircraft which we use for the local and regional routes, which is not appropriate. That is why you need smaller aircraft. If the shareholder could give us the aircraft for a start, we know that the cake is small, but they will go a long way.
We also want to refurbish and modernise our 767s so that we are more competitive. Since 2016, we have done very well in terms of self-sufficiency. All daily operations, we are funding them on our own. The only support we are getting from the ministry is insurance. Even on the insurance, from the quarter that we have just ended, we managed to pay on our own, so the potential is there.
NC: How much have you budgeted for the two planes?
DC: We were modest and had asked for US$6 million to buy the two planes. So if the shareholder can give us those two aircraft, we should be able to gradually fund other modernisation programmes which we have been doing from internally generated funds. But because we are using big aircraft like the 767s to go to Bulawayo, it’s a loss because it chews a lot of fuel.
NC: AirZim has been off the international aviation scene for over a decade now. What steps has the board taken to ensure readmission?
DC: We are ready for recertification by Easa because we have done everything that we were asked to do. We are also ready for certification with Iata. This year, we would like to complete two recertifications and we are ready. We have also started modernisation which has gone very far. The manual nature of our operations was the major reason we were kicked out by Easa because they said the technology in the airline industry has improved so much and there was no way one could run efficiently on a manual basis. I believe we have modernised three or four systems in the engineering and flight operations systems and we are now trying to modernise the SAP (enterprise resource planning) system, which is the mother system which is part and parcel of our restructuring.
NC: AirZim has been saddled with a huge foreign and domestic debt for years, estimated at US$341 million as at December 2017. How is the board planning to clean up the balance sheet so that it becomes attractive for investment?
DC: The debt assumption was going to be done by government this year. That debt does not belong to AirZim Private Limited; it belongs to AirZim Holdings. But we had to do the job. We have given the shareholder what is owed. On that debt issue, most of it is inter-parastatal debt. We feel that the tag that is attached to the company in terms of being overburdened and unattractive is actually not correct. The debt is inter-parastatal. The real debt we have is the external debt which is US$26 million, the rest is local. Part of the debt is emerging from 2011 and 2012 when the airline was not functional. The employees are saying they still want to get paid. They did not manage the situation well. We are trying to do a payment plan, but that plan can only be approved if we get planes for local routes. If we also complete our audits, we will be able to fly long haul and get more foreign currency. We would also want the shareholder to come through and pay because the debts date back to 2004 when the airline stopped paying its employees. The external debt dates back to 2004.
NC: There have been reports of a possible partnership between the airline and a Qatari partner. Has the deal been finalised?
DC: We have attracted a number of partners and have forwarded their names to the shareholder because it’s not a board decision. People have been saying AirZim is not attractive because of debt, but it is obvious we can attract partners.
NC: AirZim’s agent booking system has often malfunctioned, leading to double-booking and the inconveniencing of clients. What is the airline doing to rectify such anomalies that taint the image of both the country and the flag carrier?
DC: It was not that the system was crashing. When we don’t have foreign currency to pay them, they cut us off. So we would be in the queue to pay them. That is what caused the problems. But it has now been resolved by the new reservation system.
NC: What are your parting shots?
DC: As AirZim board, we are focussed and we are not moved. We update the shareholder all the time. As far as the board is concerned, we have cleaned up the company; it is ready for take-off, but we should get the capital. But after the initial funding, we can find ourselves.