Foreign airlines drain US$100m per year
AT least US$100 million is being drained out of the economy every year by foreign airlines that have taken advantage of a weak airline industry in Zimbabwe, The Financial Gazette’s Companies & Markets (C&M) established this week.Air Zimbabwe (AirZim) has been the only domestic player allowed to fly on key routes, competing with 13 foreign airlines. Domestic airlines have not been permitted to fly these routes.However, a report by the Zimbabwe National Chamber of Commerce (ZNCC) titled Aviation — a Catalyst for Promoting Tourism, Industry and Commerce in Zimbabwe, indicates that reluctance by government to allow domestic players on lucrative routes has resulted in foreign airlines dominating these routes, depriving the country of foreign currency.Three South African airlines — South African Airways, Comair and Airlink — control over 90 percent of the market share on the Harare-Johannesburg, Johannesburg-Victoria Falls and Johannesburg-Bulawayo routes, against AirZim’s 10 percent.Two years ago, the privately run Fly Kumba also complemented AirZim but it collapsed after about one year.The report said in 2011, for instance, one million passengers connected into these key routes, generating over US$800 million.AirZim generated US$160 million, or 20 percent of total revenue.Out of 23 000 tonnes of cargo shipped during the period, Zimbabwean airlines flew 500 tonnes, generating US$870 000 out of a possible US$40 million.“As a country, Zimbabwe could be losing potential earnings of over US$8 million per month to foreign airlines,” the report revealed, querying why government had turned down over 40 applications for new domestic airlines, preferring to protect one operator at the expense of the entire economy.Over 93 000 direct and indirect potential new jobs could have been created if government registered new domestic players, the report said.It noted that at least five key destinations have not been connected because AirZim has failed to service these routes.Zimbabwe’s aviation industry has the capacity to directly employ 46 000 people but only 3 000 workers were employed in the industry last year.It has the potential to create another 96 000 jobs in downstream industries.ZNCC said every job created in the airline industry resulted in 6,1 downstream employment opportunities.AirZim charges US$300 on the Harare-Bulawayo route, but the report said this could be slashed to US$50 if new competitors were introduced.ZNCC said government must immediately open up of the air space.“Zimbabwean applicants who have met all required conditions for starting airlines have found themselves unable to do so because the Ministry of Transport and Communications has not been forthcoming in granting the necessary air traffic rights,” said the report.“The lack of suitable flights for domestic passengers has affected the development of domestic tourism. Some visitors simply call off trips due to the costs and inconvenience of having to travel to Victoria Falls via Johannesburg.
For Zimbabwe, the minimum acceptable market share is 50 percent and this can only be achieved by allowing more players. Achieving the minimum acceptable market share would result 100 percent increase in direct and indirect taxes, statutory contributions, corporate and shareholder taxes and passenger service fees as well as 400 percent improvement in the balance of payment for services,” said the ZNCC report.“The tourism industry… accounts for five percent of the country’s Gross Domestic Product (GDP)… (it is) capable of accounting for as much as 10 percent of GDP if it is allowed to flourish,” the report noted.“Demand is likely to further increase to five frequencies per day due to the decline in fares (on the Harare-Bulawayo route.... Read the full, comprehensive news article and discuss at The Financial Gazette