Loss-making Air Zimbabwe is laying off some 200 staff as part of a restructuring plan

Zimbabwe economy: Quick View – Air Zimbabwe lays off staff

Event

July 18 (Economist Intelligence Unit) — Loss-making Air Zimbabwe is laying off some 200 staff as part of a restructuring plan, according to its chairwoman, Chipo Dyanda.

Analysis

This is Air Zimbabwe’s fourth round of lay-offs in less than a decade: it cut some 300 positions in August 2015, following cuts in 2009 and 2013, although it subsequently re-hired some of those let go. The latest lay-offs, focusing on back-office workers and managers, will reduce staff by more than one-third. According to Ms Dyanda, Air Zimbabwe currently has a ratio of some 45 workers per aircraft. This is substantially below regional operators such as South African Airways and Ethiopian Airlines, which have respective averages of 158 and 167 staff per plane. However, such operators have substantially more planes and a wider network: Air Zimbabwe currently has just four planes, and in May 2017 was banned from flying within the EU because of “unaddressed safety deficiencies” (although it was not in any event operating within the region).

Old aircraft and equipment is a large factor in safety concerns-and in the parastatal’s financial underperformance. High operating costs and general mismanagement have also contributed to the airline’s putative insolvency. (The airline has failed to submit financial statements for the past eight years but is reported to have debts of some US$330m.) The government is studying a number of options to turn the airline around. For example, it is seeking partnerships with international airlines (since investor interest has proven weak), and may “wet lease” aircraft from Malaysia-meaning that the Malaysian entity would provide the plane and some crew, as well as maintenance services and operating insurance. Another possibility is the liquidation of Air Zimbabwe and the establishment of a new entity, with the government assuming Air Zimbabwe’s existing debt, and issuing Treasury bills to creditors. The authorities have regularly turned to T-bills as a financing option, issuing more than US$400m of the bills in 2016 alone. This underscores the paucity of financing options available, but adds to perceptions that the authorities regard T-bills as a form of surrogate currency to settle state expenditure.