AirZim in debt trap

Dumisani Muleya

NATIONAL airline Air Zimbabwe is caught in a serious debt trap which is crippling its operations and hampering efforts by stakeholders to revive the sinking carrier.




Air Zimbabwe, now surviving on financial handouts from the central bank, has a US$14 million debt with $100 billion owing. The debt crisis has become an albatross around the neck of the airline already reeling from a number of other problems such as a depleted fleet, failure to service its routes, poor revenue inflows and mismanagement – mostly by incompetent political appointees.


Documents in the possession of this paper show that the Reserve Bank has kept Air Zimbabwe flying by doling out public funds every month.


Since August the airline has borrowed US$13 million and £378 591 from the central bank. The money was used largely to pay Air BP International for fuel, aviation insurance, auxiliary power unit, and IATA for clearing charges.


Air Zimbabwe has also received at least $722 billion for working capital and servicing its overdraft facility with the Jewel Bank from the central bank’s Parastatal Re-orientation Programme (Parp), which started in February.


A report by the Reserve Bank’s Parp division chief Rongai Chizema sent to deputy central bank governor Nicholas Ncube, dated November 24, on Air Zimbabwe, says Parp is currently exposed to the tune of $717 billion. It says the money from the central bank was used to service the carrier’s overdraft facility at Jewel Bank and FBC Bank (formerly First Bank). It was also used to pay for weekly fuel requirements. Air Zimbabwe now needs about 800 000 litres a week.


Chizema’s report, obtained from Air Zimbabwe, says efforts to revive the airline have not succeeded because of embedded structural problems at the airline.


It cites Air Zimbabwe’s problems as weak financial controls, poor marketing strategies and revenue-generating initiatives, poor cost management systems, weak corporate governance, structures and systems, poor conditions of service, poor equipment utilisation, and lack of a consistent management policy.


“The matters requiring attention at the airline have been attended to on an ad hoc basis, which is typical of crisis management,” the report says. “Such conditions, if allowed to continue, would jeopardise the turnaround potential of the airline.”


Chizema’s report further says Parp’s goal is to stabilise Air Zimbabwe and to reposition its balance sheet and revive its collapsing operations.


“Parp also seeks to ensure that revenues and expenses are properly accounted for in order to portray the correct sate of the financial affairs for the airline at any given point in time,” it says.


It says the short-term challenges facing Air Zimbabwe which will have an immediate impact on its operations if unresolved include its failure to bill onward passengers and personal cargo in United States dollars, non-billing of outward bound passengers for passenger service charges in US dollars, plying non-performing routes, use of wrong sets of equipment on domestic and regional routes, non-availability of financial management systems, lack of cost control systems, and aircraft flying without an auxiliary unit, something which results in extra fuel usage and high maintenance costs on international routes.


Air Zimbabwe, run down through extended periods of mismanagement and under-capitalisation, now only has eight planes, two of which are non operational, compared to the 18 planes it had at Independence in 1980.


After scrapping 12 regional routes, the airline still flies to Johannesburg, Mauritius, Lusaka, Lilongwe and Nairobi. Locally, it flies to Bulawayo, Victoria Falls and Kariba after pulling out of the Masvingo, Hwange and Buffalo Range routes. Internationally, it goes to London, Dubai and Beijing.


As part of a strategy to ensure the airline’s recovery, Chizema’s report suggests an overhaul of the management and operations structures and systems. There have been many meetings between Air Zimbabwe and government officials of late trying to resolve the airline’s problems.