High fuel costs, ageing planes cripple AirZim

via High fuel costs, ageing planes cripple AirZim – DailyNews Live 14 September 2014 by Kudzai Chawafambira

HARARE – High fuel costs coupled with an ageing aircraft fleet are the major factors weighing down Air Zimbabwe (AirZim)’s revival efforts, the airline’s acting chief executive Edmund Makona told Parliament.

He said the challenges made the national carrier uncompetitive.

Out of its 10 aircraft, only three are in good working condition, while others are at various stages of resuscitation.

According to the International Air Transport Association (Iata), between 25 to 36 percent of an airline’s total operating costs is constituted by fuel expenses.

“The fuel that Air Zimbabwe is buying locally is expensive. We are looking at more than $1, sometimes $1,15,” Makona told Parliamentary Transport and portfolio committee last week.

“When you go down south, it’s about $0, 89. That alone, tells a story about the operational datum of Air Zim compared to its competitors,” he said.

He said despite operating safely over the years, the national airliner’s fleet is now obsolete.

“Boeing indicates, for example on the Boeing 767s and 737s, that the operational life in terms of economic life is 20 years,” he said, adding that “Air Zimbabwe’s aircrafts are beyond that”

“What it means is that there is a lot that goes into maintenance costs. There is a lot that goes into increased fuel bills because aged aircrafts consume more fuel.”

He noted that the biggest solution to Air Zim’s woes is not necessarily funding, but “modernisation of the fleet to be able to compete sustainably on the market”.

“In terms of Air Zimbabwe today, there is now a need to relook at the modernisation of the fleet. We will be able to manage other cost drivers if we can have new aircrafts,” said Makona.

He said currently, the airliner’s revenue is generated from passengers and chartered flights from the President’s Office, accounting for 39 percent of revenue while cargo contributes two percent.

This comes as the airliner is currently saddled by a $302 million debt accumulated over the years at a time when it is putting up efforts to restore viability following years of decline.

The national carrier is currently seeking $368 million to sustain the viability of operations.

Air Zim’s acting board chairperson Eric Harid noted that the huge debt overhang was also compounded by lawsuits from staff members and creditors who were suing the national carrier for taking too long to pay them.

He admitted that at AirZim, there was a huge under-capitalisation, high fuels costs, shrinking of route networks and poor corporate governance issues that needed to be dealt with.

Ironically, Harid is also the airline’s finance general manager thus exposing the lack of sincerity in instilling good corporate governance practices.

“I had the advantage of having come a little early as general manager in March and at that time, I was reporting to the chief executive (Makona). When we found ourselves in this situation (appointment of AirZim board in July 2014) we had already established rapport,” he said.

Harid admitted that he would still work under Makona as general manager but as far as boardroom issues were concerned, the former would report to him.

“Maybe honourable members have a better way of helping us out, we would be glad to hear you,” he said.

AirZim last audited accounts in 2008 while those for 2009 are yet to be ratified.

The parastatal is aiming for optimum use of personnel in the next six months after which, it will review progress.

COMMENTS

WORDPRESS: 15
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    JRR56 8 years ago

    Airline seems to be run similar to the government. Shambolic, corrupt, incompetent!

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    40 % revenue from the ‘ presidents ‘ office ?? If the criminals actually paid airmugabeland it might help a teeny weeny bit – but unlikely to happen. A free ride for every corrupt junket

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    gandanga 8 years ago

    Corporate governance is key in strategic turnaround of any business. 1)How can a General Manager-Finance be an Acting Board chair, where his senior at management reports to his junior at Board meetings. 2) Assuming there are financial irregularities which require Board’s resolve, how will they be tackled? 3) The individual in conflict should also smell the coffee if he has integrity.4) The whip should be cracked on the appointing authority.

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    Roving Eagle 8 years ago

    “When you go down south, it’s about $0, 89. That alone, tells a story about the operational datum of Air Zim compared to its competitors,” he said.

    The need to be sophisticated unnecessarily complicates management in Zimbabwe. “operational datum” even though the meaning is not lost is not a good choice of words.

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    John Thomas 8 years ago

    This is how ZANU do their things. Air Zimbabwe is simply another ZANU parasite against Zimbabweans.

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    Panda moyo 8 years ago

    Just someone s personal taxi.nothing new.airline is always receiving bailouts for as far as i can remember.frends take turns to loot with with his blessing

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    Doris 8 years ago

    “Fly Air Zimbabwe, with a tradition of scaring”!

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    Mlimo 8 years ago

    Let Mugabe fly on one that’s about to fail preferably this month on his way to the UN

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    Zvarwadza 8 years ago

    The 39% revenue in accounting terms is real money Govt and Robert have already expended but in financial terms have not yet paid up. So why continue offering a service and incurring more debt to a customer who is already in default. I strongly think Harid got his Finance training in the Shake-Shake buliding and was capped by Mugabe.

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    Mixed Race 8 years ago

    The truth is that Air Zimbabwe does not need extra planes because their services are mainly for government ministers and other politicians.Who want to use an airline which hardly keeps scheduled times in this modern age?The three air crafts working are adequate-1xBoeing 767-200ER for the president and other two short range for the politicians for regional shopping trips and SADC meetings.
    Most airlines are respected by their nationals by giving their taxpayers well subsidized fares eg Japan has a special domestic Haneda Airport within the city centre which has more domestic traffic than Narita International Airport situated about 15-20 kilometers from city centre.The locals have easy access to the metro transport system. I watched these jumbos Boeing 747-400 series type taking off and landing every minute to cater for the domestic traffic.The needs of their locals are more important to them because these authorities know who pays their salaries not here.
    Things will automatically change when we change our old ways of misguided and naive thinking.

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    Mseyamwa 8 years ago

    Proper governance should come before new cash injections. How can peoples’ money be sunk in a skunk?

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    Mhofu 8 years ago

    Saka nhai why charge half of what SAA charges? Not that I want fares high but something doesn’t make sense when fuel is a dollar something here and 0.89 in RSA and yet you charge 200$ less??? Am I missing something nhai? Kudos for good safety record! Ma engineer anomiramira, pity not complimented at the top.

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    Mixed Race 8 years ago

    Yes you missing something more important than simple charges.Reputation and reliability are very vital in aviation business eg you can pay less to fly to Johannesburg but if you arrive there too late for an important business meeting or contract negotiations then you lose millions to your competitors.I hope @Mhofu you understand this simplified explanation.

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    COME ON YOU GUYS, ARE YOU FORGETTING THE MASS CORRUPTION CREATED IN THE AIRLINE THROUGH THE INSURANCE AUDIT, MILLIONS OF DOLLARS MISSING THROUGH PREVIOUS CHIEF EXECUTIVES OVER THE YEARS . WHERE HAS THAT MONEY GONE– POOR MANAGEMENT- ALL THE DR,& PHDS, NEVER HAD THEM WHEN THE AIRLINE WAS SUCCESSFUL IN THE BYGONE DAYS. WHERE HAVE THE COURT CASES, GONE— SWEPT UNDER THE CARPET AGAIN. AIRZIM WILL NEVER RISE AGAIN UNTILL CORRUPT PEOPLE ARE KEPT AWAY FROM SENIOR MANAGEMENT POSITIONS. LOOK HOW FAR KENYA AIRWAYS ARE AHEAD OF US & WE WERE AHEAD OF THEM IN THE 1980S SHAME ON YOU SO CALLED MANAGERS WHO HAVE WRECKED A 60 YEAR OLD NATIONAL AIRLINE

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    MlimoPhd 8 years ago

    Since I last posted my phd came through the mail. Three jets does not constitue an airline it’s for his majesty king of Zimbabwe RG Mugabe Phd