by Staff reporter
2011 October 09
BELEAGUERED national carrier Air Zimbabwe Holdings has plunged into fresh problems after Galileo International withdrew its franchise, a move that could paralyse the airline’s operations. This paper broke the story in June this year that Galileo International was threatening to withdraw its local franchise.
The termination of agreement will negatively affect revenue inflows at the debt ridden airline and translate into a loss of market share as travel agents who were on Galileo will no longer use Air Zimbabwe as was the set-up.
Air Zimbabwe board chairman Mr Jonathan Kadzura confirmed the development, saying they had done all they could to keep the subsidiaries but due to lack of co-operation from stakeholders they had to let it go.
“It a sad story, Galileo is gone, but there is more to it than what meets the eye. We had asked for 15 days to settle the outstanding issue with Travelport- the franchise holders- but they just lapsed without anything fruitful materialising as we waited for the shareholder’s response,” confirmed Mr Kadzura. He could not be drawn into divulging the “outstanding issues with Galileo International”. The Sunday Mail Business is reliably informed that Galileo International has opened up a new company in the country and has since roped in former Galileo Zimbabwe workers and is already operating.
However, this paper had not yet established if the new company had complied with the country’s indigenisation regulations by the time of going for print.
The development compounds the situation for the national carrier, which has been suspended from participating on the International Air Transport Association (IATA)’s billing and settlement plans (BSP) for failing to settle a US$282 000 debt.
Galileo Zimbabwe was established in May 1998 as a result of the distribution agreement between the airline and Galileo International.
In 1999, Galileo Zimbabwe became Galileo Zimbabwe (Private) Limited, a wholly owned subsidiary of Air Zimbabwe, after registration with the Registrar of Companies in Zimbabwe.
Galileo Zimbabwe distributed a computerised reservations system (CRS) service to travel agents in Zimbabwe as its core business.
A CRS is an automated system, which processes booking data.
Air Zimbabwe through its board tried in vain to keep the Galileo franchise and was given 15 days to clear the debt.
The airline had suggested that they share the commission on a 20 to 80 percent ratio, with 20 percent going to the to cover running costs while 80 percent goes to Galileo International to cover Air Zimbabwe’s distribution costs
Documents in possession of this paper reveal that Air Zimbabwe’s acting chief executive, Mr Innocent Mavhunga, wrote a letter to the Permanent Secretary in the Ministry of Transport, Communications and Infrastructural Development, Mr Patterson Mbiriri, in June informing him about the development.
“Galileo International (Travelport) has threatened to terminate the distribution agreement and in its place wants to form a company to take over the functions of Galileo Zimbabwe.
“Travelport wants to terminate the agreement so that they can take over the Galileo Zimbabwe function through the company they are forming with some Zimbabweans who are being used as fronts for Travelport, while they are effectively in control,” read part of the letter.
The letter further states that: “It should be recognised that the NDC (Galileo Zimbabwe) generates strategic funds which have been used to pay Air Zimbabwe’s distribution costs.
“Without these funds the airline will not be able to pay the Galileo Worldspan distribution costs, which will result in the airline being cut off as had happened with Amadeus.”
Air Zimbabwe further alleges that Galileo International has in the past tried to take over Galileo Tanzania and Galileo South Africa without success. However, the letter notes that Air Zimbabwe met with Galileo International’s vice-president for Southern Africa over the issue and they indicated that they were not agreeable to any suggestions that will see them not withdrawing the franchise.