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.