Zambia Airways Takes Off To Operationalisation

It was on the 28th December 2018 that Mr. Mateyo Kaluba, Industrial Development Corporation (IDC) Group Chief Executive Officer, announced the appointment of members of the Board of Directors of Zambia Airways, with immediate effect. This was the first assertive signal that the phoenix that was Zambia Airways was surely rising again from the ashes.

The board composition announced brought together representation from two countries. The Zambian half appointed include:

  • Mr. Bonaventure Mutale S.C., – A senior member of the legal profession and Former Attorney General;
  • Mr. Robinson Misitala – An Aeronautical Engineer, aircraft accidents investigations specialist and Aviation business Executive who previously served as Managing Director at National Airports Corporation; and
  • Mr. Misheck Lungu, Permanent Secretary in the Ministry of Transport and Communication

The remaining members of the Board were appointed in line with the Shareholders Agreement between IDC and Ethiopian Airlines are:

  • Mr. Tewolde Gebre Mariam – Group Chief Executive Officer for Ethiopian Airlines;
  • Mrs. Rahel Assefa – Vice President Marketing for Ethiopian Airlines;
  • Mr. Kassim Geresu – Vice President Internal Audit & Compliance for Ethiopian Airlines

IDC’s announcement signalled to the market that the rebirthed airline would be flying through African skies through a joint venture. The press release issued by IDC indicates that the additional member of the Board representing IDC would be appointed later, bringing the number of IDC appointees to four. Mateyo says that the new board will spearhead the process to operationalize Zambia Airways.

“The skills mix and vast experience of the board members gives us the confidence that we have the right team to actualize the joint investment between IDC and Ethiopian Airlines,” he said.

If the specialties of the board were to be considered from a strategic point of view, this team embodies a host of talent that is tailored to manage the relationship that has been formed by this venture. On the Zambian side, the board currently consists expertise in law (which should help with the mechanics of the joint venture), aviation (to provide guidance on the type of aeronautic solutions to be used in the venture) and aviation policy implementation expertise.

On the Ethiopian Airlines side, the board composition comprises representation from Strategy, decision making as well as conformance to aviation standards.

The appointment of the Board marks an important milestone in the establishment of a national airline. The Board will take the necessary steps to ensure all the regulatory requirements to operationalize the airline are met as well as put in place a competent management team.

Due to the sensitivity and nostalgia associated with this development, the board signals it will have regular interactions with the media and the general public to ensure effective communication and information sharing with the general public.

Mr Kaluba has since congratulated the new members and wished them well as they take on the responsibility to make Zambia Airways an airline that will bring pride and jobs to the Zambian people.
Zambia Airways is a partnership with Ethiopian Airways.

The IDC is an investment holding company owned by the Government. It has the dual mandate to maximum its long-term shareholder value in its subsidiaries and also invests in key sectors of the economy. One of the sectors that IDC targets to create over 300,000 jobs is the tourism sector. With the substantial investments already being made by Government around new airport infrastructure as well as possibilities of opening up new airports in provinces denied of decent airstrips, IDC sees itself creating value through this move.

Intent for re-establishing the airline was first signaled in Quarter 3 of 2018. This was following the joint statement in which Mr. Kaluba, and the Group Chief Executive Officer of Ethiopian Airlines (ET), Mr. Tewolde Gebremariam, held a signing ceremony on 19th August 2018 in Lusaka to mark the agreement as Shareholders of Zambia Airways.

In the statement, it was reviewed that the initial investment as start-up for the national carrier would be US$30 million and that as operation commence the airline would facilitate the financing necessary to support its growth.

As strategic equity partners on the national airline project of Zambia, IDC will hold 55% equity in the carrier, with Ethiopian Airlines holding 45%. (Equity entails ownership represented by the number of shares the owning entity holds as investment over time.

It is expected that the new airline will operate 12 aircraft and carry over 1.9 million passengers by 2028. The initial investment alone is not enough to purchase the fleet that is targeted therefore it is anticipated that a leasing mechanism will be the best option to start with. In addition, associated running costs such as fleet management, fuel, airport taxes will need to be considered if this commercial venture is to be a success. Thus far, African aviation has been in peril with South African Airways leading the rout. Addressing the 27th African Aviation Summit, Air Finance Africa 2018, Chris Zweigenthal, CEO of the Airlines Association of Southern Africa (AASA) was quoted by stating “Challenges continue to confront the aviation industry in Africa despite Africa only holding 3% of global air transport market”.

This will have a great impact on the strategy the company choses. It is noted that Zambia Airways will launch local and regional routes this year while intercontinental routes, including Europe, the Middle East and Asia, will be added in the near future. This is indicative of a Low Cost Airline Model (no thrills) from inception.

State-owned Zambia Airways went into liquidation in 1994. The privately-owned Zambian Airways then emerged as the country’s main carrier with flights to other major hubs in southern Africa, but it suspended operations in 2009.

To avoid going back to the drawing board it is essential to question; is the appointment based on expertise as shown with the Ethiopian appointees? Will the investment by IDC leverage the risk to profitability? And is the skewed board appointees best ways to copy and paste ET’s business plan?

Meanwhile, the joint statement shines glimpse of assurance that the National Airline will instil a performance-driven culture through strong corporate governance structures and make Zambia Airways commercially viable.

It is said that for the Ethiopian Airlines, this investment is consistent it’s Vision 2025 Multiple Hubs Strategy in Africa. And an indigenous and truly Pan-African airline, ET believes that African carriers will only get their fair share of the aviation industry and the African market through partnerships with other African carriers.

As for IDC, this investment represents commitment to deepening and strengthening Zambia’s industrialization. The establishment of the national airline is believed to spur growth in the tourism sector and will have a significant multiplier effect on job creation through the different businesses in the aviation supply chain such as hotels, restaurants, travel agencies, publishers, and others.

With the Zambian Government’s drive to build transportation infrastructure from the new airports, good road networks, and now the airline, we can surely hope with IDC that Zambia should become Southern Africa’s regional aviation and logistics hub.

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