Home Economy Delay Zambia Airways relaunch-CTPD

Delay Zambia Airways relaunch-CTPD

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Zambia Airways
Zambia Airways

The Centre for Trade Policy and Development (CTPD) has advised government put the re-launch of the national airline on hold till Zambia is in a better macroeconomic position.

CTPD researcher Bright Chizonde said a research conducted by the centre indicated that re-launching the national carrier was not prudent due to Zambia’s current financial and macroeconomic situation.

Mr. Chizonde said this in an open letter to the new Minister of Transport and Communication Mutotwe Kafwaya.

Below is the full letter

Open Letter to the New Minister of Transport and Communication-CTPD

Dear Honorable Mutotwe L. Kafwaya MP,

We would like to congratulate you on your new appointment as Minister of Transport and Communication and welcome your decision to review the re-launching of Zambia Airways. We agree with you concerning the need to make an informed decision on the matter before pushing forward, modifying or changing the course of this decision. We at the Center for Trade Policy and Development (CTPD) have conducted comprehensive research on this matter and have concluded that the decision to re-launch Zambia airways is not prudent due to Zambia’s current financial and macroeconomic situation. We strongly advise government to put the national airline on hold till the nation is in a better macroeconomic position to launch it as a regional carrier. There is need for IDC to adjust its business model and develop a financing model for Zambia Airways – these should thereafter be made public to address stakeholder concerns regarding operations, private investment synergies and government financing of the national airline.

Our reasons for advising against the re-launching of the national airline are threefold. Firstly, Zambia Airways would face a high risk of failure if it is launched using the proposed business model. Zambia has a relatively small population and economy and lacks strategic location for intercontinental flights. South African Airways (SAA) has been constrained to a loss making position due to this lack of geographical advantage. Even though Zambia is partnering with Ethiopian Airways, Ethiopian Airways’ success is driven by a number of factors such as strategic location within the horn of Africa and a comprehensive business model, some of which is impossible to replicate in the Zambian context.

Furthermore, our assessment of Ethiopia’s Partnership with Malawian Airlines reveals somewhat disappointing results. Despite the Good Partnership model on paper and technical assistance, Malawi Airlines has dragged to breakeven and remains in a loss making state for over 4 years now.

Secondly, Government is currently financially constrained due to debt levels which means it is unable to absorb either the initial investment or re-capitalization costs in case of failure. While we agree that a national airline has the potential to facilitate for economic development by improving tourism and stimulating non-traditional exports, these potential benefits must be weighed against the risks of failure and increased indebtedness. Investing US$55 million into this project has the opportunity cost of using these funds towards government spending on healthcare, education and social protection. A loan to cover this investment would increase debt and interest payments and could further crowd out social spending in the event that the airline requires a future bailout – as we have seen in South Africa. Such reckless spending during difficult economic times sends a negative signal to investors and external partners that Zambia is not willing to make the necessary changes to put the economy back on track.

Lastly, Zambia has a vibrant domestic aviation industry which is dominated by private players. The launching of Zambia airways using the proposed business model would crowd out the private sector since Zambia Airways is envisaged to have domestic, regional and intercontinental flights. Government should instead be seeking to crowd in private sector players, rather than interfering with the market through pursuing investments which could be taken on by the private sector. In a period of mounting debt, the capital requirements to establish and the prospect of low-returns in a challenging industry, make the re-launch of Zambia Airways a gamble that the government can ill afford. Instead of currently pursuing a national airline, GRZ could make policy changes to the domestic market that promotes investment into the Zambian aviation sector, which would in turn support economic growth. CPTD would therefore like to urge you to reconsider and halt the plans to relaunch the national airline.

We strongly urge you to reconsider plans to re-launch the national airline. In light of financial constraints and a struggling economy, now is not the time to press ahead with an ill-conceived business model that crowds out much needed private sector investment. Further consideration is needed to ensure that Zambia benefits from a national airline and citizens are protected from the burden of additional unproductive public debt.

Yours,
Mr. Bright Chizonde,
CTPD Researcher

[Read 2,595 times, 5 reads today]

45 COMMENTS

  1. This is BS Research … Forex revenues and reserves will immediately start to improve the moment those ticket sales begin whether bought in Zambia or abroad.

    Profits could come 3 to 5 years down the road but the business would still be a going concern. Facebook didn’t make a profit for 10 years, Microsoft didn’t make a profit for 8 years and Amazon didn’t make a profit for 6 years.

    But today all the founding CEOs of these companies are the 3 richest men in the world. Macroeconomic analysis should involve broader perspectives, not this monolithic diatribe here.

    Relaunch Zambia Airways immediately … even minute we delay is an opportunity cost to the smart people of the Zambian Enterprise.

    Epo mpelele … tweende webo, tweende Zambia.

    Let’s roll …

    BRM

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    • F*** Chizonde, f** Kafwaya.
      Do you know PF government pays huge salary to Tayali’s Ethiopian brother in law who CEO for Zambia Airways? Money comes from IDC.
      That’s you docile, short-memoried Zambians are.
      48 houses case is closed, you suckers are screwed again.

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    • Good sir, Mr Mumba, how many Zambian-GRZ controlled companies are making a profit. Let’s not look at people who put business first like the examples you’ve given, but at Zambian ventures which have succeeded with perseverance.

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    • CTPD, I disagree with you here. Your reasoning in letter is not convincing. Zambia has been consistently doing over 1m tourists l past few years and flights to Zambia have only been increasing. Assuming average cost of air ticket id $1,000, this is easily a $1billion industry. Zambia remains one of the most profitable destinations for airlines like SAA, ET, KQ, etc. We shouldn’t sit back & watch others eat our lunch. We need to wake up & stop this fear syndrome usually sponsored by those who want to see us remain underdeveloped or keep monopoly. For a landlocked country a national airline is a necessity as crucial link to rest of the world. Thous shall not fear. God Bless Zambia

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    • @Mwape … please refer to 2.1 through 2.5 below

      @The Chosen One … Axiomatic, Sir; simply axiomatic!!! At the moment only safari operators in RSA are bundling those tour packages. Our hospitality industry has to source forex to pay them.

      Those dollars would instead stay in Zambia if our own tour operators did the bundle bookings as packages for safaris, hotel and airfare. These are the economics that matter not the nonsensical fear mongering Chizonde, the paid lobbyists is trying to perpetrate here.

      Epo mpelele,

      BRM

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    • BR MUMBA ( SR)

      Nice one! And keep Preaching the Gospel of Enterprising Zambia ++++

      Now, this guy is illuminating. What research is talking about? If Bill Gates, Steve Jobs, and all pioneers in the history of mankind said!

      Oh! the conditions don’t fit, let us stop the projects, discoveries, or the pioneering, the world would still be a Stone Age Era.

      You cannot say, my God today it’s raining, cold or hot, therefore the conditions don’t fit for me to go for work. We don’t need Nay Sayers like him. We are all part of the Grand Solution to take Zambia Forward.

      Who is he really speaking for? Could it be his GrandPa

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    • I will give another example. ++ I am not a fan of Fred Mmembe. But I respect him.

      When everyone was saying, he will not last with his aspirations to run a newspaper from the very early days, Mmembe stuck by his guts under tough conditions.

      Out of that – The Post became the biggest selling newsprint beating Daily Mail and The Times all combines. Add to that it created a lot of jobs for Journalists, the government benefited in collecting taxes. Its only that Mmembe messed himself

      That’s how you Roll in life. +++ As [ BR Mumba SR ] always says on this platform

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    • @INDEPENDENT OBSERVER … Axiomatic!!! Axiomatic indeed … Let’s roll!!!

      Ala tweende webo, tweende Zambia!!!

      Epo mpelele,

      BRM

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    • B R Mumba, Sr …. it’s evident that your detractors can’t match your skill and veracity.

      You should have been president of this country young man. Perfect analysis!!! What can I say???

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  2. We tried to advice the same thing to GRZ ,to Brian Mushimba and the fake expert BR Mumba that Zambia Airways is not a viable business but they won’t listen.

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    • @Mzambia fimo fimo … first of all I don’t oversell myself neither do I misrepresent myself. I am not an aviation expert but an Investment Banker with some clients in the aviation business.

      Having said that, have you ever heard of Republican Airways or Wisconsin Air?? These are local vibrant small airlines in the United States that fly for American Airlines. So, what Chizonde is referring to as a panacea to the private aviation business is not only myopic but redundant.

      The local private aviation business can be co-opted into the bigger Zambia Airways, maintain their routes and still fly under Zambia Airways just like those two airlines do here in the US creating a win-win scenario for everyone involved.

      I hate myopic thinking and reading through this diatribe gives a…

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    • Continued …

      I hate myopic thinking and reading through this diatribe gives a well-seasoned analyst a feeling that Chizonde is paid by these small private aviation players in the Zambian market to do a beating for them.

      Nothing in his analysis gives credence to the actual economies of scale such an enterprise would bring to the fore just a biased opinion built on protecting an existing industry, that’s fearful of new competition.

      Well, I have good news for you!!! Competition is great for business but collaboration is even better. Microsoft and Apple both reached the most valuable enterprises on the stock market when they collaborated on windows apps on iPhone.

      Coming to clientele, Rwanda Air is making a killing in the region even beating Kenya Airways and you know why???…

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    • Continued …

      Because Rwanda Air discovered that it has such a huge market due to its location which is less than 1,000 miles north of Lusaka.

      Here are some numbers for you. From Lusaka, Ndola and Livingstone a new regional airline has potential to reach 450,000,000 passengers within two and half hours of flight time. That’s a huge market, it’s so huge!!! Here is one more number for you!!! That market is one and half times the entire population of the world’s largest economy.

      Here’s another number for you, in the first two years of operations, Zambia Airways would bring in $3Billion in ticket sales. That’s the much needed forex which would help stabilize the ZMK. That’s twice your current foreign reserves at BoZ seating at only $1.2Billion.

      I can go on and on to debunk this…

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    • Continued …

      I can go on and on to debunk this Chizonde nonsense with actual numbers not just speculation not backed by any data.

      In fact, I can take this another step further. During my last business trip this April in Hong Kong, I needed to catch the next available flight home because of a family emergency. I couldn’t get anything from there within 48 hours but could cross over into Shenzhen and fly Air China and connect on United out of Shanghai.

      I couldn’t believe how cheat that ticket was, half my regular price!!! Why??? Air China and United are in collaboration and the synergies are phenomenal both for the passengers and airlines.

      Having said that, how about adding a third leg to this partnership??? Ethiopian, Zambian and a local Chinese airline???

      The Chinese are…

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    • Continued …

      The Chinese are all over Zambia and the Sub-Saharan region. My last flight to Zambia was half full of the Chinese and that’s just a year and half ago. You would be shocked at the economics once you expand the horizon and involve more players in such win-win scenarios.

      When you don’t think outside the box, you lose out and this kakamania letter to Kafwaya is total nonsense. Mushimba would have thrown it into the dustbin where it belongs.

      Let’s get this thing done. Let’s get Zambia Airways off the drawing board back in the air where it belongs.

      Tweende Kafwaya wesu, tweende webo!!

      Epo mpelele …

      BRM

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    • Mzambia wa Nonsense …. go back to school. It seems you learnt nothing from there before.

      You and that chap Gay Jay are a disgrace to this country. A read through your all comments here at LT leaves one wondering whether you even have a brain or not.

      Leave sensible kids like B R Mumba, Sr alone you moron.

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  3. we told you this you fools don’t listen to us, you’d rather go and waste money doing research when you could have saved by listening to what we told you

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  4. mumba we told you so.
    you and your fellow morons would rather go and waste money carrying out research when the writing is pretty much on the wall

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  5. BR Mumba answer this:

    “Zambia Railways and Zammtel didn’t make profit for how long?”

    No kudos for the correct answer

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  6. It does not even require research to know that the airline is a candidate for certan failure. Or else just to run it in these challenging times it will eat the 10% GDP that remains now after all those debts.
    Ask President Lungu to ask President Ramaphose about how much he is spending to bail out his Zesco and South African airways.

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  7. “Investing US $55 million into this project has the opportunity cost of using these funds towards government spending on healthcare,education and social protection.”

    Bwana Researcher,this is a capital investment and not social consumption and while you are against the relaunching of the national airline,you should have advised the minister which alternative investment to make with less or zero opportunity cost relative to social consumption,which all things being equal i.e good corporate governance included, will breakeven and make profits that will later be used to pay for healthcare,education and social protection.This is the sustainable way of funding social consumption. And in this way,every tax kwacha invested has more marginal benefit to both the taxpayer and the national at…

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  8. Zambia is a rich country who should face their own challenges if you want to jump you don’t look at those who failed to jump, failures will always be there but that can not keep you from succeeding where others have failed : Zambia is doing very well economically unfortunately Zambians cannot see it we who live outside Zambia see great success in Zambian economy.
    Employment is no longer in mining sector but in the building industry, I can tell you there little un employment in Zambia, if you want employment you can easily create one for yourself than waiting for govt.

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  9. ***link deleted***

    Our strategic and economic outlook is far worse than Europe, Asia,America and South African’s airways.
    Yet we want to think theirs hope for us in the airline business.
    We could have invested the money into a light commuter rail system for the city of Lusaka and benefit the tax payers at large.

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  10. Zambians are doomsayers, they don’t believe in themselves which is a shame really. what is wrong with re-introducing the defunct airline? As a people we need to keep trying and learn from our mistakes made in the past. Ba BR. Mumba is right in all he has said. Just because the airline failed first time doesn’t mean Zambia should never, ever try to venture in this industry. Why are all these airlines still flying to Lusaka if it wasn’t profitable? Small countries like Malawi and other airlines have found free market with no competition from the host country.

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  11. This is not about being doomsayers. Face facts and the reality obtaining at the moment. We are talking about a govt. airline. The first issue is, under which regime? With their track record, would any sane person entrust this ramshackle of a govt. to run an airline? Secondly, other airlines in the region are struggling to find passengers. The launch of Zambia Airways will suddenly attract extra passengers? Thirdly, you can’t invest in education, agriculture and manufacturing industries to create REAL jobs and you want to pour money into a national airline to operate in a limping dysfunctional economy? Emotional outbursts, devoid of principles or facts to back them, such as being exhibited by BR Mumba, are just that – sentimental nonsense in an economy that should be prioritizing enabling…

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    • Gay Jay … there you are!!! I finally got you out of that Brexit rat hole. For your information, that kid B R Mumba, Sr is a junior to me.

      He would be the first one to admit that fact unlike cretins like you

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    • You have no clue what you are taking about. Explain the meaning of “Real Investment” to me

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    • It seems to me that the only REAL INVESTMENT GRZ thought was making by educating for free for 12 years was a real loss.

      GRZ has had no return on its investment at all because you turned out to be an economic refugee abroad with no REAL tax contribution to your homeland economy.

      What a shame

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  12. @ Luchembe, … respond to my arguments against a national airline – instead of just rhetorically asking about my expertise or what I am doing in the UK. We have enough serious issues to deal with at the moment in Zambia and the simplistic argument for a national airline in the said environment is not part of the solution, in my opinion and those of other people who do not place passion before reality.

    Everything else has to be in place before you start dreaming about a national airline. Not the other way round. Just like the new Lusaka airport. It should be other attractions on the ground that will bring more visitors – then, perhaps, subsequently the need to build a new airport – not hoping that a new airport in itself will bring more visitors.

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    • @Harold Muna … you just qualified the reasoning behind my asking about your expertise. If the Emirates thought like you, there would be no Dubai today, there would be no major hub in the Middle East.

      Ever heard of the phrase “Build it and they will come?” I was Right Zambia lost when we spent 12 years worth of free education on you.

      I don’t think you are productive enough even for the UK

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  13. All you guys are just being emotional over PF pipe dreams.
    This is not time to build Castles in the air
    A simple internet research shows that medium sized Airlines are barely breaking even.
    Most large airlines are heavily subsidized by governments in order to survive the competition and that includes Emirates. Even Delta airlines enjoys financial incentives from the US state of Georgia to some extent.
    Remember Zambia is seriously broke as at now.
    That money should have been investigated in the Lusaka passenger transit system.
    A metro rail system project to link the suburbs of Lusaka would have gone a long ways

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    • Hey Dumb Sense … who told you a national airline should be and/or is a PF pipe dream???

      To me it isn’t … you are nothing but a partisan hawk especially that you have already sold yourself out by exemplified party politics.

      Some of you guys in the opposition act like everything the party in power brings up is evil and you would the same guys wanting a national airline once you get in power.

      For the life of me, such hypocrisy is beyond me

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  14. Five medium sized airlines went bankrupt in Europe between 2018 and 2019 alone.
    A major Indian airline that seemed to have been doing well with a large customer base went bankrupt this year.
    US airlines have been merging to avoid going under. US airlines bargain for financial incentives from states that host their major hubs and head office.
    Profit margins in the airline business don’t make business sense.
    Theirs time for everything and now is not the time for fruitless pursuits.
    Leasing aircrafts would have been the better option rather than buying those Russian made aircraft.
    The resale value of those aircrafts if at all any one would be interested in buying them could way too low.

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  15. Moral of the story is, don’t buy a hiace mini bus or a Mitsubishi fuso canter with your retirement money just because everyone is doing the same.
    Be wise with your investments or in this case government investments.
    Governments shouldn’t be investing in airlines, or railways for commercial goods.

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  16. This government should have been busy thinking about how to empower us Zambians to start private or public funded airline businesses.
    Am all for @ Br Mumba Sr operating an international airline hub from out of Lusaka because he would probably strike better deals than a government agency would do.

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  17. @…Luchembe You have not addressed my arguments, for Zambia in particular. Yours are emotional outbursts devoid of rationality. Hence the further personal attacks on a person you do not know. I am sure right thinking individuals will know where education was wasted, but then the comment over the same qualifies your emotions and irrelevancies.

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    • 1. Type of equipment – 737 – 800 Very fuel efficient
      2. Partnership – Ethiopian Airlines has a solid truck record
      3. Hind-sight with original QZ
      5. Zambia Airways commencing with 737s that will act as feeder fleet to Ethiopian.
      6. Maintenance will be under Ethiopian.
      7. Zambia loosing foreign currency to Airlines remitting their proceeds out of Zambia. Zambia Airways may bring about a counter-balance.

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