Airzim turns down restructuring deal

Airzim turns down restructuring deal | The Herald March 24, 2016

Golden Sibanda : Senior Business Reporter

AIR Zimbabwe spurned proposals for a restructuring deal from Canadian aviation firm, NEXTFLIGHTAIR, an arrangement that would have helped it acquire five more aircraft and grow its revenue to $136 million in a year. NEXTFLIGHTAIR director of operations Mr Tan Ahmed said that he has visited Zimbabwe three times pursuing potential co-operation with Government and Air Zimbabwe in a bid to help turnaround the airline’s fortunes. He said that his company also submitted two proposals with nothing material being achieved out those sojourns, but added that while a lot has changed since then, there still is an opportunity to do business with Air Zimbabwe.

In its initial proposal the Canadian company wanted to be given an opportunity to operate the Harare-London and Harare-Guangzhou (China) routes, paying all the expenses and returning $500 000 per month.

In the other instance, a request was made that NEXTFLIGHTAIR submit a turnaround proposal, which it did and suggested to work with Air Zimbabwe in every aspect of the airline’s operations to reclaim markets and attain viability, but the Canadian firm said that is the last it heard from Zimbabwe.

The company proposed to restart the operations of Air Zimbabwe and thereafter hand over back to Government after five years of successful operations with sustainable growth an important part of this project.

“On a second occasion we were told to submit a restructuring plan. We suggested to take the whole operation as is and in return turnaround the airline within two years. At the end we did not hear anything,” said Mr Ahmed.

Today, Air Zimbabwe continues to be dogged by a multiplicity of operational and financial challenges including lack of funding, old and inefficient equipment, loss of market share, service unreliability and debts of over $300 million.

Mr Ahmed said he even held meetings with some senior officials from Government and Air Zimbabwe, but nothing materialised after, despite his firm presenting a comprehensive mutually beneficial turnaround plan.

Transport and Infrastructural Development Secretary Munesu Munodawafa had not responded to e-mailed questions on the offer yesterday.

But Transport Minister Jorum Gumbo said this week that Air Zimbabwe remains in precarious position and Government is still seeking partners.

NEXTFLIGHTAIR planned to revive and operate Air Zimbabwe aiming specifically at linking major cities in Zimbabwe, African regions and beyond.

Air Zimbabwe is presently flying only to South Africa, with most of its current flights being to major cities and resorts internally.

It cannot ply one of its most lucrative routes, Harare-London, because of debts to aviation industry players including navigation agency Worldspan whom it owes about $3 million, which it is battling to extinguish. Attempts to resolve sticking issues have dragged on since 2012.

Air Zimbabwe, NEXTFLIGHTAIR stated in its comprehensive business plan, would “primarily focus to get our lost sectors by offering extraordinary customer service, reliability and safety with our two international direct flights to London and Guangzhou our major contributor to our cash flow”.

The flights would be the back bone of regional market routes while international flights would not only serve Zimbabwe, but neighbours as well.
To achieve the projected results it would need to use uniform equipment, starting with three turboprops 30-35 seats for domestic routes, three 85 seats for regional and two wide body for international sectors.

The Canadian firm’s proposal shows that its strategy would see Airzim achieving average passenger load factors in the 65-85 percent range, depending on route and season, and increasing thereafter to 75-90 percent, maximising revenue and return on investment while minimising risk. NEXTFLIGHTAIR targeted Airzim’s revenue in excess of $33 million per quarter within the first six months of flight operations, and exceeding 3 percent growth quarter over quarter, by end of the second year.

Further, the Canadian consultancy firm, which also operates an own airline named NEXTJET and has offices in Canada, Australia and Germany, targeted net operating profits in the 25 percent range within the first 12 months.

The Canadian firm planned to apply a conservative business model, whose targets would be achieved on an initial investment of $81 million (option 1) or $31 million (option 2), the funding being borrowed capital, which the company said would be returned within three years of operations.

In order to achieve Airzim’s other key objectives, the Canadian company would identify and develop key interline alliances, co-operation, association, and partnerships with other larger, established and highly regarded airlines within and beyond targeted region.

It was envisaged this would enable the proposed or restructured airline to provide an extensive range of connections, through fares, frequent-flyer mileage sharing, and other passenger and client advantages through interline arrangements, code shares, common hubbing, and so forth.

NEXTFLIGHTAIR, together with its reputable partner companies and associations throughout the countries in Europe and the Americas, identifies key business and profit opportunities and then tries to develop projects and strategic partnerships to implement with a view to benefit from them.
This would complement reorganisation, carving of new markets, fulfilling unmet demand and investment in marketing and advertising.