Air Zimbabwe is the national flag-carrier of Zimbabwe and is owned by the government, its sole shareholder. Founded in 1980, Air Zimbabwe can trace its lineage back through Air Zimbabwe-Rhodesia and Air Rhodesia, to Central African Airways, the colonial airline founded in 1947 to service the then Federation of Rhodesia and Nyasaland, and which also gave birth to two other now defunct carriers – Zambia Airways and Air Malawi. Though Air Zimbabwe experienced nearly two decades of solid growth with flights covering Southern Africa, East Africa, and Europe, the rapid decline in the Zimbabwean economy between 2000 and 2009 seriously impacted its business and finances culminating in the suspension of operations in 2012/13. But, while limited domestic and regional services have since resumed, longhaul continues to remain elusive.
So what are Air Zimbabwe’s prospects in the rapidly changing Southern African market? With the advent of Low Cost Carriers such as Fastjet and Flyafrica, is Air Zimbabwe geared for the future? ch-aviation’s Ivan Nadalet and Max Oldorf headed to Air Zimbabwe’s headquarters in Harare to chat to CEO Edmund Makona to make sense of the airline’s status-quo, its turnaround plans and its longterm goals.
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Ed tell us a little about yourself. How did you get into the aviation business?
I got into aviation as far back as 1985. My background is that I’m an aviation engineer and aside from that I have been involved in various safety-initiatives around Africa under AFRAA (African Airlines Association) and IATA. I am very passionate about safety especially within the context of the African Aviation renaissance. Concerning said renaissance, I believe African aviation has enormous potential and, yet, it continues to be underrated.
Air Zimbabwe’s financial difficulties are no secret. However, recent reports in the Zimbabwean press suggest your sole shareholder, the Zimbabwean government, is planning to recapitalize the airline and absorb its debt burden. What’s the immediate game plan to get Air Zimbabwe back on the road to profitability?
The immediate game plan involves the restoration of market confidence in Air Zimbabwe wherein various milestones have already been achieved. The second issue relates to stopping the bleeding of the airline. So there are various initiatives, underpinned by cost reduction and revenue enhancement, which the airline has so far undertaken.
Can you expand on what these initiatives are?
We propose to go about that by means of a restructuring of the airline, in order to make sure that we increase productivity. We are also focusing on reducing unnecessary costs while introducing cost-efficiency measures. We have already looked at revenue diversification. It’s one issue that is clear in our minds. When you look at aviation today, profit margins stand at USD29.4 billion or 3% from a global revenue total of USD623 billion. So for the African market, that translates to about USD1.50 profit per passenger per seat. That alone will not sustain the industry. Maybe much less than what you need to buy a chocolate, isn’t it? So that leads us to the whole issue of revenue diversification and ancillary revenue collection. While flying will continue to be our priority, it will have to be sustained by other means which Air Zimbabwe has already looked at including establishing ourselves as a key MRO facility in Southern African given our existing IOSA certification. We have also started the process of securing European Aviation Safety Agency (EASA) certification.
Air Zimbabwe operates a relatively old fleet including Boeing 737-200Advs and B767-200(ER)s. Despite their age, they are actually only half-way through their cycles. Is that correct?
That’s very true.
Do you therefore intend to embark on a fleet renewal program as part of your restructuring effort, or is that only going to be left for later?
I think the first thing I must underscore is that, and you rightly say this, the fleet is underutilized in terms of cycles. The Air Zimbabwe fleet has not even reached half its minimum half-cycle in terms of lifespan. In terms of safety those aircraft have a typical seventy-five thousand (75’000) cycle Limit Of Validity. In terms of age, yes, our B767 and B737 average just over twenty years of age which does impact us in terms of maintenance and fuel costs. In terms of our strategic plan, we intend to capitalize on and maximize the use of our aircraft first before pursuing fleet modernization which will follow in the second phase.
What’s on your shopping list?
There are quite a number of available options. We are looking at aircraft within the medium range. We have already secured Airbus A320s.
Are you shifting away from your traditional dependency on Boeing towards Airbus? Or, is this lease just a one-off arrangement?
Within the context of our renewal strategy we’ve said ‘What do we have available?’ Well, we have the Airbus, which is part of our fleet at the moment. But we have not really shifted away from our original position of having Boeing aircraft given that they are also a part of our fleet. But there is need to optimize our operations in terms of fleet standardization. Now, with Airbus the next obvious thing to look at would be the A330 which would then naturally become the aircraft of choice for the long haul. But we are also keen on Boeing’s Dreamliners for our longhaul needs.
So you are also considering the A330 and the B787?
Are you looking to acquire the aircraft outright as with your existing Boeing fleet, or are you looking to lease in the interim?
The answer to that question lies in our strategic plan. Government, as the sole shareholder, has been mandated to find a strategic partner for the airline. So, any prospective strategic partner that does come in will inevitably have to deal with the issues of old equipment. This will, in turn, tie in with our plans to modernize the fleet. So, securing new aircraft is seen as a last resort in the event we are not able to secure a strategic partner. But, I’m happy to say, at the moment, there have been a lot of promises from a lot of big airlines keen on partnering us and we very remain hopeful.
Are you able to disclose any of the potential partners?
Not at the moment. There are quite a number that are interested in marriage. But, for the time being we are not in a position to disclose whom they are.
Concerning your hunt for an investor, there has been a lot of negative press about Air Zimbabwe vis-a-vis the recent corruption scandals that have engulfed top management. How will you guarantee a strategic partner that any financing they do put up will necessarily go towards operations and they themselves won’t be caught up in any political shenanigans or interference? To put it bluntly, how would you guarantee a potential strategic partner that their money will be used correctly?
I think the first thing that I would want to say is that from the national point of view, the Zimbabwean government is taking a strong position in terms of the eradication of corruption which the President of the Republic of Zimbabwe, his Excellency, Robert Gabriel Mugabe emphasized under the terms of the Ten-Point Plan [Ed note. a plan presented to parliament in August which aims to maintain economic growth in particular the creation of jobs]. Among the issues that the Zimbabwean government is focusing on is the eradication of corruption. That on its own will give any would-be investor the amount of confidence that is required. Take away the airline. We want to look at it from a national level and say ‘this is the pronouncement from the head of state of Zimbabwe’. That corruption is now going to be a thing of the past and the government is no longer going to condone corruption. So, you don’t want to look at this at the level of Zimbabwe alone, but at the level of Zimbabwe, as a state. This is now the way we are going – it’s a new page that we are turning.
When you mention the term “strategic partner”, are you looking for someone to take over the airline or only control a minority stake in the carrier?
There are a number of options that are being looked at, but I can definitely state that the taking over of the airline is not on the table. Rather, we are looking at a partnership.
How will that play out in light of Zimbabwe’s very controversial Indigenization act? Will the law capping foreign ownership in the airline at 49% be enforced or is there room for some flexibility?
I wouldn’t want to comment on this other than to say it is a policy issue and is therefore up to government.
Let’s move onto your route network plans – longhaul in particular. Do you have any new destinations on the radar screen?
Many. Within the region we are targeting quite a number of destinations: Durban, Cape Town, Dar Es Salaam, Lilongwe, Juba in South Sudan. Further afield, we are also looking at resuming London, Dubai, and Beijing.
Given recent deferments, when do you intend to resume your flagship Harare-London Gatwick service and what has been the cause of the delay?
I wouldn’t want to say “delay” but we did have issues in 2011 and 2012 wherein the airline suspended operations prior to re-launching using a phased approach. Firstly, we focused on the restoration of market confidence which was followed by the rebuilding of our domestic and regional networks. We are now looking to resume longhaul international operations.
In terms of the Yamoussoukro Agreement [Ed note. a multilateral air service agreement to liberalize Africa's skies, first proposed in 1988], some of your fellow CEOs, primarily those in the private sector, have argued that given a lack of commitment from member states, the accord has now been rendered redundant and that integration should be taken via a phased bloc approach. For example member states of SADC, ECOWAS and EAC would first focus on Open Skies within the confines of their own blocs before opening up to one another. What’s your opinion on that?
Liberalization has to be looked at from a supranational perspective. At the last African Union summit in January, Yamoussoukro and the move towards a single African market featured prominently on the agenda while in October of last year, AU Commission Chairwoman Nkosazana Dlamini Zuma, was clear about the role the aviation sector is to play in the implementation of the AU’s Agenda 2063. Now, that alone indicates that, at that level, there is an understanding that the implementation of Yamoussoukro is not an option. And, arising out of the same meeting, there were eleven states that committed to the implementation of Yamoussoukro, well before the deadline of 2017. And, Zimbabwe’s one of them. South Africa is as is Egypt, Kenya, Uganda, Benin, Cape Verde, Republic of Congo, Ivory Coast, Ethiopia, Nigeria, and Rwanda. InterVISTAS’s study provides further evidence on the benefits of total integration including the creation 155,100 jobs in each country’s aviation and tourism sectors as well as boosting each country’s GDP by USD1.3 billion. So, what is lacking, in terms of the non-implementation of Yamoussoukro by the 44 states, is an understanding of the accord’s benefits and the non-availability of a regulating mechanism.
As you’ve just mentioned, eleven states have now signed up to implement liberalization. Is this not proof then that a phased, regional approach is the key to achieving full continental integration in the longrun?
I personally wouldn’t want to look at it that way because that would suggest that the non-implementation of Yamoussoukro is as a result of unwillingness on the member states’ behalf. Rather, I want to underscore that with any change there is potential for resistance – it’s human nature. People don’t look at it in a positive way and say: “This is going to transform us for the better.” So, in my opinion, the lack of implementation of Yamoussoukro has been solely centered on the non-appreciation of its benefits as well as a lack of clarity in terms of how it will be effected.
Zimbabwe has begun opening up its domestic market to more operators – LCCs in particular. Though Zimbabwe flyafrica is now inactive, Fastjet Zimbabwe is operational with plans to start regional flights in the near future. How is Air Zimbabwe preparing for this sudden influx in competition?
Well I must hasten to say that Air Zimbabwe has always been ready. We have prepared our strategy to take into account external factors, as well as threats and opportunities. So, our strategic plan will insulate us against any would be competitors. The issue about Air Zimbabwe today is that within our study we’ve said: “We will continue to do what we are doing.” Aviation is a game of resilience. Those that don’t make it will just fall by the wayside. And, the market will separate the boys from the men.
But, are you not saying that by virtue of the fact that you are a government-owned entity? If you were a private operator your point of view would necessarily be more pragmatic.
I want to say No because even though Air Zimbabwe is government-owned, we are not sustained by funding from the shareholder. So. in other words, this is a clear demonstration that the Zimbabwean government’s desire to ensure that Air Zimbabwe becomes a profitable and self-sustaining entity. So, we are not necessarily being spoon-fed from the government.
Tell us about your safety culture. Air Zimbabwe is one of the very few African airlines that has never suffered a fatal accident since its inception in 1980.
Thank you very much for acknowledging that Air Zimbabwe is rated as one of the safest airlines not only in Africa, but in the world. While it is a crowning achievement, it puts pressure on us to ensure that we continue to maintain such standards. Despite our financial challenges, we have made sure to inculcate into our workforce a strong safety culture. And, you are well aware, safety isn’t defined by the absence of an accident, nor the presence of it. It is about the implementation of a robust, hazard identification and service risk management system. And, this is precisely what we are doing. I guess the lesson here is that, you can make safety a cornerstone of your business culture even with meager resources. And this is a policy which we have pursued and we will continue to pursue at Air Zimbabwe. And our safety standards more than meet those of international institutions. We’ve undergone IATA audits since 2008 and we’ve been able to consistently meet all safety-related obligations.
Onto Zimbabwe’s infrastructure. We’ve seen Victoria Falls International Airport will soon commission a new terminal and runway capable of handling widebody aircraft. In fact, Turkish Airlines, Emirates, and Qatar Airways have already expressed great interest in starting direct international flights there. With its advent as Zimbabwe’s third international gateway and given the area’s enormous tourism traffic, are you not concerned its opening will cannibalize traffic away from your Harare hub?
There are two issues that we will look at here, and the question is – where is Victoria Falls? It’s in Zimbabwe. Where is Harare airport? It is in Zimbabwe. So whichever way it is, the issues are that Zimbabwe, as a nation, as a country, will benefit from this project. But, Victoria Falls is purely a tourist destination and we want to leverage that and develop it into a tourist hub. But, at the same time, when we look at Harare, we also want to develop it into an international hub. Given its proximity to other African capitals, Harare makes for a very attractive secondary regional hub.
Considering Zimbabwe’s current economic slowdown, is the country capable of sustaining two hubs? Next door in Mozambique, Aeroportos de Moçambique (AdM) is actually considering reducing the number of international gateways from eight to three to help boost through-put at national carrier LAM – Linhas Aéreas de Moçambique as well as their main Maputo, Beira and Nacala hubs.
The issue is not about having a large market. What I want us to look at is passengers from outside Zimbabwe. The impression you give is that we are focusing on the domestic but in reality we are looking at the wider route network where we will be able to bring in foreign passengers.
In an ideal situation, where would you like to see Air Zimbabwe in ten years’ time?
We have tasked ourselves to become better, and to achieve that we have benchmarked ourselves against the best in the industry. We also want the carrier to be a reflection of Zimbabwe, that when you see the airline, you see a reflection of the country. At the same time, we are also looking at being a catalyst for social-economic progress. We cannot create a hub concept in Zimbabwe, if we do not have a robust national airline. So, it is in this context, that we are inspired to achieve more, by ensuring that the national airline takes its rightful position in aiding the country’s progress.
Ed Makona, thanks for talking to ch-aviation.
Thanks very much.
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