Airlines pull trigger on Zimbabwe

Source: Airlines pull trigger on Zimbabwe | The Financial Gazette April 6, 2017

THE world’s largest airlines have started tightening screws on liquidity-starved Zimbabwe owing to a worsening foreign currency crisis that has resulted in a huge backlog of unremitted ticket payments with some now outstanding for over 140 days, the Financial Gazette can exclusively reveal.

At least five global airlines namely Qantas Airways, Lufthansa, KLM Royal Dutch Airlines, Air France and Delta Airlines have informed their travel agents worldwide that they have to bill their passengers in cash or stop accepting bookings altogether to avoid non-settlement of obligations from Zimbabwe’s banks, which are battling an acute shortage of foreign currency.
What this effectively means is that their tickets can only be bought using hard cash, excluding bond notes, which can only act as a medium of exchange for domestic transactions.
Considering that hard currency is now difficult to come by in Zimbabwe, this obviously comes at a heavy cost for the country’s economy, currently in the intensive care.
The immediate effect would be that of restricting the movement of thousands of people who cannot access cash to enable themselves to travel to various destinations serviced by these international airlines.
It may also force law-abiding Zimbabweans to dabble in illegalities such as doing their banking outside the country’s borders, thus externalising scarce foreign currency.
Fears are that other airlines, including key regional players, could follow suit, putting the last nail in the coffin for the tourism industry whose fortunes partly underpin the country’s economical revival hopes.
International airlines have been caught up in a payments gridlock triggered by the foreign currency crisis, with estimates indicating that at least US$30 million due to the foreign airlines was locked in the local banking sector.
Regional airlines, Ethiopian Airlines, South African Airways, Kenya Airways, British Airways’ ComAir, Emirates, Taag Angolan, Namibian Airways and Malawian Airways are among the foreign carriers that have been affected by the foreign currency shortages in the country.
On March 30, Australian carrier, Qantas Airways, wrote to travel agents, saying it had lost confidence in the ability of local banks to settle “substantial outstanding amounts” owed to the airline in Zimbabwe.
Qantas’ regional manager for Africa, Michi Messner, wrote to travel agents saying the International Air Transport Association (IATA) — a trade association for the world’s airlines representing some 265 airlines or 83 percent of total air traffic — had advised them that the situation with the repatriation of funds out of Zimbabwe was worsening.
“Although IATA and member airlines are proceeding with lobbying efforts, the last sales period settled is for P2Oct2016 and current delay is sitting at 138 days. Qantas has a substantial amount outstanding from BSP Zimbabwe and to avoid further risk, we’ve taken the decision to discontinue QF ticketing for all travel agents with access to our stock effective immediately,” Messner said.
“I understand this is not a very popular decision and places further pressure on you as the travel agent to conduct business. You can be assured that we will continue to work with IATA to find solutions in the hope that this situation is resolved as soon as possible. We will continue to monitor settlement trends and will review QF ticketing authority only once all outstanding funds have been settled. Unfortunately, there is no timeline or any clear indication when the situation will improve.”
QF is an IATA airline code for Qantas Airways, while BSP stands for Billing and Settlement Plan.
This is a system designed to facilitate and simplify the selling, reporting and remitting procedures of IATA accredited passenger sales agents, as well as improving financial control and cash flow for BSP airlines.
IATA supports many areas of aviation activity and helps formulate industry policies on critical aviation issues.
In its communication to travel agents, Qantas regretted the move but added that it had been left with little room to manoeuvre.
Qantas South Africa is now likely to assist local travel agents with their bookings, quotations and ticketing by arranging electronic transfer funds into its offshore bank account, or to utilise a valid credit card.

Betty Katiyo, president of the Association of Zimbabwe Travel Agents, confirmed the latest development, saying they will soon be making representations to the powers-that-be to see how the impasse could be resolved.
“It is not just Qantas but many other airlines such as Delta and Lufthansa. Because of the banks’ failure to remit foreign currency payments, these airlines are now afraid of the risks associated with their exposure to Zimbabwe,” she said.
“We fear that tourism will be affected and there is uncertainty already. We do not know which airline will pull out next, in terms of us doing their ticketing,” she added.
Foreign airlines are forecasting the situation to get even gloomier, despite a commitment by the Reserve Bank of Zimbabwe (RBZ) last year to prioritise payments to sector players.
There have been a series of meetings between global airlines, authorities and travel agents. These have, however, failed to resolve the payment problems.
The airlines are now contemplating a number of strategies, including either completely shutting Zimbabwe out of their global system or allowing bookings from Zimbabwe to be made through South Africa.
Contacted for comment yesterday, the permanent secretary in the Ministry of Transport and Infrastructural Development, Munesu Munodawafa, said they have been fully briefed about the developments after the issue was brought to the attention of the Civil Aviation Authority of Zimbabwe (CAAZ).
“We know the impact of not assisting airlines adequately hence they will be assisted. These airlines bring in tourists, potential investors and also foreign currency. The airlines association has brought up the issue with CAAZ and it has been brought to the attention of relevant authorities,” he said.
“It is an issue which is developing as it started when we began to experience foreign currency problems. But it is temporary and it will be resolved,” he added.
Last year, the RBZ assured airlines that they would be given priority in the allocation of foreign currency.
This was after airlines agreed to accept bond notes, which were introduced in November, for ticket sales.
At the beginning March, IATA was forced to dispatch its top executives into the country for crucial meetings with authorities to craft possible measures for the remittance of funds held in Zimbabwe.
Restrictions in the allocation of foreign currency for external payments were introduced by the RBZ last year, as government grappled with its worst crisis since the adoption of a hard currency regime after the local unit lost its value due to hyperinflation.
The foreign currency crisis emerged as a number of foreign airlines have been introducing or expanding their operations into Zimbabwe, a development that was expected to improve tourism and boost foreign currency earnings.