Business / Companies
Galileo International threatens to withdraw its franchise from Air Zim
26 Jun 2011 at 03:43hrs | Views
Galileo International has threatened to withdraw its franchise from Air Zimbabwe Holdings, a move that could paralyse the airline's operations, The Sunday Mail Business reported on Sunday.
Galileo Zimbabwe was established in May 1998 as a division of Air Zimbabwe as a result of the distribution agreement entered into between Air Zimbabwe 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 distributes 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.
Documents in possession of this paper reveal that Air Zimbabwe's acting chief executive, Mr Innocent Mavhunga, recently wrote a letter to the Permanent Secretary in the Ministry of Transport, Communications and Infrastructural Development, Mr Patterson Mbiriri, 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 termination of agreement will negatively affect revenue inflows at the beleaguered airline and loss of market share as travel agents who were on Galileo will no longer support Air Zimbabwe as is the case with the current set-up.
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 states 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 has since 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.
"They want (Galileo International) an arrangement where they are in the driving seat and in total control of NDC," wrote Mr Mavhunga.
Air Zimbabwe had suggested that they share the commission on a 20-80 percent ratio with 20 percent going to the NDC to cover running costs while 80 percent goes to Galileo International to cover Air Zimbabwe's distribution costs.
Efforts to get a comment from Mr Mbiriri proved fruitless as he was said to be out of the country.
Sources allege that serious divisions have surfaced with counter accusations within Air Zimbabwe management of trying to sabotage the State-owned enterprise.
"A storm is brewing at the airline with counter accusations amongst the management. Recently there was a public fallout between the two general managers accusing each other of trying to act on behalf of Galileo International, violating indigenisation regulations.
"There is also a mass exodus of people at Galileo Zimbabwe and they have since been roped in by the new company.
"A marketing manager at Galileo has already signalled her intention to resign in anticipation of the formation of the new company although the real mastermind is alleged to be the former general manager of Galileo," added the source.
Statistics contained in a 2009 report by the Zimbabwe Tourism Authority on tourists showed that five of the major airlines serving Zimbabwe ' Air Zimbabwe, South African Airways, British Airways-ComAir, Air Namibia and South African Airlink ' take up 93 percent of the airline market share in the country.
The report also notes that the market share for Air Zimbabwe fell by 11 percent in 2009, which saw South African Airways taking over the leading position in terms of passenger market share in the country.
The airline has in recent years grounded several aircraft because they were no longer worth flying and scaled down on the number of flights per week to rationalise operations and contain ballooning costs.
Galileo Zimbabwe was established in May 1998 as a division of Air Zimbabwe as a result of the distribution agreement entered into between Air Zimbabwe 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 distributes 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.
Documents in possession of this paper reveal that Air Zimbabwe's acting chief executive, Mr Innocent Mavhunga, recently wrote a letter to the Permanent Secretary in the Ministry of Transport, Communications and Infrastructural Development, Mr Patterson Mbiriri, 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 termination of agreement will negatively affect revenue inflows at the beleaguered airline and loss of market share as travel agents who were on Galileo will no longer support Air Zimbabwe as is the case with the current set-up.
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."
However, the letter notes that Air Zimbabwe has since 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.
"They want (Galileo International) an arrangement where they are in the driving seat and in total control of NDC," wrote Mr Mavhunga.
Air Zimbabwe had suggested that they share the commission on a 20-80 percent ratio with 20 percent going to the NDC to cover running costs while 80 percent goes to Galileo International to cover Air Zimbabwe's distribution costs.
Efforts to get a comment from Mr Mbiriri proved fruitless as he was said to be out of the country.
Sources allege that serious divisions have surfaced with counter accusations within Air Zimbabwe management of trying to sabotage the State-owned enterprise.
"A storm is brewing at the airline with counter accusations amongst the management. Recently there was a public fallout between the two general managers accusing each other of trying to act on behalf of Galileo International, violating indigenisation regulations.
"There is also a mass exodus of people at Galileo Zimbabwe and they have since been roped in by the new company.
"A marketing manager at Galileo has already signalled her intention to resign in anticipation of the formation of the new company although the real mastermind is alleged to be the former general manager of Galileo," added the source.
Statistics contained in a 2009 report by the Zimbabwe Tourism Authority on tourists showed that five of the major airlines serving Zimbabwe ' Air Zimbabwe, South African Airways, British Airways-ComAir, Air Namibia and South African Airlink ' take up 93 percent of the airline market share in the country.
The report also notes that the market share for Air Zimbabwe fell by 11 percent in 2009, which saw South African Airways taking over the leading position in terms of passenger market share in the country.
The airline has in recent years grounded several aircraft because they were no longer worth flying and scaled down on the number of flights per week to rationalise operations and contain ballooning costs.
Source - TSM
