Plans to re-launch national airline not prudent, insists CTPD
A researcher by Centre for Trade Policy and Development (CTPD) has found that government’s decision to re-launch the national airline is not prudent due to the country’s debt position and poor micro-economic situation presently.
And CTPD has however recommended that government swap shareholding with Ethiopian airways to enhance autonomy, if it decides to proceed with re-launching the airline.
CTPD lead researcher Bright Chizonde said during the launch of the research, Wednesday, that the chances of successfully relaunching the national airline were extremely slim adding that Zambia could not afford to take such chances given the current financial position.
“So, looking at some factors in the Zambian case, we are looking at now what is Zambia’s perspective for success. The positives, so the structure of the economy is fairly good. Service sector is almost 59 percent contribution. We have training facilities, Zambia Services Training Institute although it would be a true investment for it to be in a condition for it to support the national airline. So, the size of the economy is fairly very small, about US$30 billion maximum. And the size of the population is also very small about 16 million people. So therefore, it means that there will be a very small middle-class population which can demand for air transport. This is still too small to support a national airline. Airline autonomy is not likely to be there because we are looking at the partnership with the Ethiopian airways. If you want full autonomy, it would have been better to swap the stakes where Zambian can become a majority shareholder,” Chizondi said.
“We only have strategic location for regional flights and not long flights abroad. Zambia airways is likely to face stiff competition from other airlines across Zambia. But on the domestic sector, we only have two players so, so most likely, it can do well in the domestic sector. The board of directors is also pending and so that’s what we are waiting for to relaunch the national airways…but as we said earlier, it takes long to break even. So even the Zambian Airways will take longer to break even and if we are unlucky, we may fail. If the national airline drags to break even as we have seen from the South African case, it may require bailouts. And bailouts can go as far as US$3 billion which may be doubling our Euro-bonds. We also expect crowding out of private investments because the airline will have to, if the Zambian airways comes into fruition, we expect it to fight the stakes in terms of the domestic airline. That will be crowding out of the private investments. Most of the factors that we have checked suggest that the chances of successfully re-launching the national airline are very slim.”
CTPD, however, recommended that government swap shareholding with Ethiopian airways to enhance autonomy, if it decided to proceed and re-launch the airline.
“So, the Centre for Trade Policy and Development consider the decision to re-launch the national airline as not prudent due to the nation current financial and micro-economic situation. The implications are, firstly we believe re-launching a national airline will be a drain on national resources due to the re-investments that will be required and the bailouts. Our recommendation would be instead of pursuing establishing the national airline, the Zambian government should make policy changes to the domestic market that promote investment into the Zambian aviation sector which should in turn support economic growth,” said Chizonde.
“So, if we are interested in just facilitating economic activity, then there is a better way to promote private sector investment instead of re-establishing a national airline. However, we know that, if you look at the implementation, it has gone quite far, we had also to come up with recommendations in case the government proceeds with the decision. We recommend to swap, the share proportions between IDC and Ethiopian airways to enhance autonomy and reduce cost of investment, so if there was a swap, we are assured that Ethiopian airlines will have majority of the shares and will more influence in the operations of the national airline.”