How AirZim can ride out crisis 

Source: How AirZim can ride out crisis – NewsDay Zimbabwe

BY JOSEPH BRIAN MADHIMBA
Air travel is one of the drivers of globalisation as it makes it possible for people of different nationalities to mingle and interact. It enables cultural and business integration.

The global airline industry is in a state of flux. The often changing business environment makes it difficult to achieve sustainable profitability.

It is an industry characterised by cut-throat competition and thin profit margins.

The turbulence in the airline industry existed before the COVID-19, which has paralysed airlines.

Travel restrictions imposed by governments have resulted in reduced numbers of air travellers.

Some airlines have folded while others have cut jobs drastically. Some have downscaled operations. These measures have caused loss of incomes and reduced demand for air travel.

Air Zimbabwe is a modest player in the industry.

But like big airlines such as Delta, Lufthansa, British Airways, Air France and Qantas, it has been facing a number of existential threats. These threats have to do with downturns in economies, increasing overheads, changing passenger demands and natural disasters.

For decades, Air Zimbabwe (AirZim) has failed to make profits because its aircraft spent more time on the ground.

Aircraft should spend more time in the air. Professor David Oxtoby from my alma mater the Wolverhapton Business School put it aptly when he said: “Airlines have no business on the ground.”

Just as capacity utilisation is crucial in manufacturing, so it is in the airline industry. AirZim must fill the seats to, at least, break-even.

It should precisely segment its markets and have a grasp clients’ needs. A case in point is the business traveller segment.

This segment can be further segmented into the time of the day or day of the week. Some business people might prefer morning, afternoon or overnight travel. Others might prefer different days depending on their schedules for business meetings.

AirZim must have thorough knowledge of competitors in order to outwit them.

In this regard, management need to identify competitors’ strengths and weaknesses, their strategies and the rationale behind them.

The airline management must have answers to questions such as: What are competitors planning to do and how can we cut the ground from under their feet?

Do we attack the competitors frontally or we chip at them from the flanks? How are competitors likely to respond to our actions?

Air Zim must concentrate on its sources of competitive advantage, that is, the things it does better than competitors. These could be quality of meals, service delivery, communication skills or time-keeping. In addition, the airline must be agile enough to develop new sources of competitive advantage when necessary.

AirZim must be circumspect in choosing routes.

High-demand destinations should be prioritised.

The timing of flights is crucial in order to achieve meaningful loads that will ensure sustained profitability.

Fares have to be competitive.

In this regard, AirZim must keep an eye on what competitors are charging.

The key determinants of fares should be distance, type of market, fuel costs, competition, customer incomes and seasonality.

After all these elements have been considered, AirZim can then apply a flexible pricing strategy, including dynamic pricing. Most airlines have moved from static to dynamic pricing, which  means charging prices that change with the predominant needs of travellers at a given moment in time.

The national airline should cut costs without compromising quality.

For example, more efficient use of the human resources can result in substantial savings on overtime pay.

Another cost cutting measure is to negotiate with suppliers in order to get lower prices for food and uniforms and other requirements.

Reducing its bloated staff complement is another way of cutting costs.

Management must keep an eye on cost behavior and adjust operations accordingly.

Advertising is necessary to constantly remind potential clients of AirZimbabwe’s value proposition. Advertising strategies should be developed in consultation with major stakeholders such as the Zimbabwe Tourism Authority (ZTA), travel agencies, hotels and car hire companies.

Inept management and poor planning have been the bane of AirZimbabwe.

The airline needs managers with strategic management skills who understand the intricacies of the industry.

There is a need for managers with futuristic thinking who can anticipate threats and opportunities.

This requires regular market research, precise analytics, comprehensive planning, adaptability and flexibility. There is simply no room for rigidity in the management of an airline.

Strategic alliances with other airlines would benefit AirZim. For example, in such alliances, there could be codeshare flights. Under this arrangement, airlines sell tickets on each other’s flights.

The revenue on the ticket is then shared in accordance with the terms of the agreement.

In essence, Codeshare flights would enable AirZim to have more destinations.

AirZim should benchmark against the best airlines in the world.

Staff exchanges with other airlines would be beneficial.

Lastly, there is no telling when the airline industry will get out of the woods given the emerging variants of the Corona virus.

The pandemic remains an existential threat.

It will take time before business returns to pre-pandemic levels. In the meantime, AirZim must continue to slug it out in its league.

The national airline is a symbol of nationalistic pride but it must make money to justify its existence.

• Joseph Brian Madhimba (PhD) is a Business and Financial Markets expert. He is a former Head of Radio and TV News at ZBC