Future prospects for SAA? Near-bankrupt Air Zim cuts third of workforce

JOHANNESBURG — To date, South Africa has thankfully avoided going down the same economic disastrous route of its northern neighbour Zimbabwe. Bob Mugabe and his Zanu-PF have a stranglehold on that country and its economy, which has literally halved in size in recent years. If there ever was an advert against nationalisation, Zimbabwe would be it. Now, its national airline is coming under pressure as Air Zimbabwe is forced to cut a third of its workforce to try to avoid bankruptcy. The staff numbers being cut are relatively small, only 200 people. But considering that Zimbabwe is more geographically centrally placed than South Africa, its airline should theoretically be a major challenger to the likes of Ethiopian. It’s a stark reminder of how tough the airline business is and how better management or even privatisation are desperately needed in the more southern tip of Africa. – Gareth van Zyl

By Godfrey Marawanyika and Desmond Kumbuka

(Bloomberg) — Air Zimbabwe is firing more than a third of its workforce to prevent the state-owned airline from going bankrupt.

The airline has debts of about $330 million, Transport Minister Joram Gumbo said in June. The carrier was also banned from operating in the European Union in May on safety concerns even though it doesn’t currently fly there. As many as 200 jobs, or more than a third of its workforce, will be cut, a person familiar with the situation said, asking not to be named as the information hasn’t been made public.

“In light of the huge financial challenges which the company is faced with, a decision to compulsorily retrench employees with immediate effect has been made,” the airline said in a letter sent to affected employees and seen by Bloomberg. The job cuts are necessary to “contain operational costs and save the national airline’s viability as a going concern.”

The fortunes of the airline, founded as Central African Airways in 1946, have declined with the country’s economy halving in size since 2000 as unemployment and a shortage of cash cut consumer demand for products ranging from plane tickets to beer over the past few years. In addition to domestic flights, the airline, which used to operate routes to Europe and China, flies to South Africa and Zambia.

Employees affected were told they will receive 3 months pay as well as two weeks pay for every year worked.

Air Zimbabwe Chief Executive Officer Ripton Muzenda didn’t immediately answer calls to his mobile phone, while Gumbo’s phone was unreachable.

For a deeper understanding of the world of money and greater financial control, upgrade to BizNews Premium.