Lusaka - Zambia will proceed to partner with Ethiopian Airlines in the re-launch of its national carrier, which went under in 1985, amid escalating debt concerns.
Zambia, which has partnered with the global carrier on a 55/45 shareholding with an initial injection of over US$30 million for preparatory works, argues that the re-establishment of the airline remains on course and the official launch is planned for the third quarter this year.
The reaffirmation to take to the skies initially planned for January 2019, comes in the wake of consultations in February this year between the stakeholders. Among matters discussed and finalised in the consultations were the initiating of the operational routes to Europe and other destinations, including the Middle East, Brian Mushimba, Zambia’s transport minister told has The Southern Times.
“We are on course and we are optimistic the programme to be operated on a commercial basis will materialise,” Mushimba said. “We anticipate to having transported over 1.9 million passengers to various destinations by 2028.”
Zambia, which has for long relied on foreign airlines to service Lusaka and other regional and international routes, believes the resumption of the national carrier will not only be a milestone in the growth of the aviation sector but also to realign itself amid economic competitiveness.
According to the terms of the agreement, the carrier will be run and sustained on a shareholder agreement between the Industrial Development Corporation of Zambia and Ethiopian Airlines.
But stakeholders have argued that the setting up of the airline could affect the debt servicing agenda, estimated at around US$10.5 billion ‑ representing 30% of China’s debt and yet to be dismantled.
The Centre for Trade and Policy Development (CTPD), a global think tank with operations in Zambia and other parts of Africa, argues that plans to revive the national carrier should be shelved until later to create room for debt servicing, part of which includes US$3 billion sought through Euro-bonds since 2012.
CTPD researcher Bright Chizonde appealed to Zambia also to consider whether the so-called economic benefits of re-launching the airline would outweigh the likely costs.
“The current fiscal position of the nation does not allow for a massive experiment in the risky aviation industry at the expense of taxpayers. Zambia is grappling with rapidly increasing debt, now about US$16 billion, and is currently implementing austerity measures,” Chizonde stated in a statement availed to The Southern Times.
“Furthermore, it is extremely difficult to make profits in the aviation sector with African airlines expected to make a combined loss of about US$100 million in 2018, and slow economic growth in Southern Africa limiting passenger demand increases to 2-3% per year, below the 5% threshold needed to support a new entrant such as Zambia Airways.
“CTPD, therefore, considers the move towards re-launching Zambia Airways at this present time a gamble that the country can ill afford.”
CTPD undertook a study recently focusing on Zambia’s plans to re-launch a national airline and unveiled a number of lessons from other countries running airlines, including South Africa, Malawi and Ethiopia, on the potential risks and success prospects of running a national airline.
Considering that Zambia, through the Industrial Development Corporation and the Ministry of Transport and Communication, has already established a board of directors and appointed a chief executive officer, and yet again postponed the launch of Zambia Airways to the third quarter of 2019 it is, therefore, important to consider how aviation industries of other African countries have fared.
A study on South African Airways (SAA) showed that the airline, one of the largest airlines in Africa with about 50 aircraft, including the Airbus A319, A320, A340 and Boeing 737 airplanes, in 1934 has been incurring losses since 2011. Losses of US$127 million were recorded in 2016 and US$475 million a year later.
As a result, SAA has relied on external assistance with its government bailing it out with US$1.2 billion in 2018 alone. SAA needs further capital injection in excess of US$2 billion to operate competitively until 2021 before it breaks even, fuelling concerns as to whether Zambia has the financial capacity.
“Is this the path Zambia would want to take? What are the reasons behind these losses (SAA) and what can Zambia learn from them?”
South African Airways operates in the southern African hub but lacks strategic location in terms of long haul flights.
Zambia is disadvantaged when it comes to intercontinental air travel, noted Chizonde.
SAA operates in a highly competitive regional and domestic industry, which squeezes profits.
Competitors include, British Airways (operated by Comair) regionally, as well as other five international airlines: Ethiopian Airlines, Emirates, Kenya Airways, TAAG of Angola and Air Namibia.
In the domestic market, SAA has sister carriers ‑ Airlink and South African Express, which compete with Fastjet, FlySafair and Kulula.com, a division of British Airways.