Business / Companies
Air Zimbabwe incurring monthly losses of $3,5 million
19 Oct 2011 at 11:10hrs | Views
National carrier Air Zimbabwe (AirZim) is incurring monthly losses of $3,5 million and therefore, seeks urgent government intervention to revive its fortunes, the airline's boss has revealed.
He told parliament's portfolio committee on State Enterprises and Parastatals Management that the struggling airliner immediately required $40 million in working capital to sustain its operations.
"AirZim has been operating under a deficit since the 1990's and this worsened at the inception of the multiple currency regime.
"We have become less competitive, hence we have to price our fares slightly below our competitors," Mavhunga said, adding monthly costs were anything between $6 million and $7,5 million against an income of just under $3 million.
AirZim is sitting on a $137 million debt most of which is local debt and management wants government - the sole shareholder in the stricken airline - to write off some debts to other state enterprises or departments.
Of the debts, Mavhunga said $112,7 million was internal, while $25 million was owed to foreign service providers.
"On internal debt, statutory obligations to companies like the Zimbabwe Revenue Authority and the National Social Security Authority account for $38 million, loans from the ministry of transport are up to $26 million, deferred staff salaries and allowances are $20 million plus $12,3 million from our overdraft facility with our banks," he added.
"Our external debt comprises $4,6 million to the International Air Transport Association and another $4 million to Global Systems. We also owe our aircraft spares and parts suppliers some money and I think we have about $5 to $8 million for navigation services," Mavhunga said.
On debtors, the interim manager said AirZim was not owed much and its biggest debtor was a Congolese operator, with $4 million in outstanding fees or money for a decades-long strategic partnership.
The AirZim management's views and oral evidence comes as the company is yet to secure funding or meaningful recapitalisation to expunge mounting debts, but government continues to drag its feet.
Although government remains reluctant to privatise the airline, which has encouraged inefficiency and corruption through various schemes, Mavhunga said there was urgent need for government to release the airline by way of commercialising it.
"I am not competent to evaluate my bosses, but (some of) these issues border on corporate governance," he said, adding that the country must go the Kenyan Airways route or model of private placement and subsequent commercialisation.
The airline, which was previously ranked highly in the region, has been crippled by debt with pilots striking over unpaid allowances.
Problems at AirZim have also been worsened by declining passenger confidence and the coming in of major international airlines on its profitable routes.
South African Airways recently launched an Airbus A330-200 on the Harare-Johannesburg route.
"If we remain undercapitalised, it will certainly further erode the market share. Our market share versus South African Airways is quite low. We control 30 percent of the Johannesburg route and market, whilst SAA accounts for about 50 percent market and British Airways slightly below 20 percent," Mavhunga said.
Foreign airlines operate new generation aircraft, which are up to 40 percent more fuel efficient compared to AirZim's obsolete fleet and, according to Mavhunga, fuel is a huge cost driver in the industry rendering his company's 23-year- old fleet uncompetitive.
He told parliament's portfolio committee on State Enterprises and Parastatals Management that the struggling airliner immediately required $40 million in working capital to sustain its operations.
"AirZim has been operating under a deficit since the 1990's and this worsened at the inception of the multiple currency regime.
"We have become less competitive, hence we have to price our fares slightly below our competitors," Mavhunga said, adding monthly costs were anything between $6 million and $7,5 million against an income of just under $3 million.
AirZim is sitting on a $137 million debt most of which is local debt and management wants government - the sole shareholder in the stricken airline - to write off some debts to other state enterprises or departments.
Of the debts, Mavhunga said $112,7 million was internal, while $25 million was owed to foreign service providers.
"On internal debt, statutory obligations to companies like the Zimbabwe Revenue Authority and the National Social Security Authority account for $38 million, loans from the ministry of transport are up to $26 million, deferred staff salaries and allowances are $20 million plus $12,3 million from our overdraft facility with our banks," he added.
"Our external debt comprises $4,6 million to the International Air Transport Association and another $4 million to Global Systems. We also owe our aircraft spares and parts suppliers some money and I think we have about $5 to $8 million for navigation services," Mavhunga said.
On debtors, the interim manager said AirZim was not owed much and its biggest debtor was a Congolese operator, with $4 million in outstanding fees or money for a decades-long strategic partnership.
The AirZim management's views and oral evidence comes as the company is yet to secure funding or meaningful recapitalisation to expunge mounting debts, but government continues to drag its feet.
Although government remains reluctant to privatise the airline, which has encouraged inefficiency and corruption through various schemes, Mavhunga said there was urgent need for government to release the airline by way of commercialising it.
"I am not competent to evaluate my bosses, but (some of) these issues border on corporate governance," he said, adding that the country must go the Kenyan Airways route or model of private placement and subsequent commercialisation.
The airline, which was previously ranked highly in the region, has been crippled by debt with pilots striking over unpaid allowances.
Problems at AirZim have also been worsened by declining passenger confidence and the coming in of major international airlines on its profitable routes.
South African Airways recently launched an Airbus A330-200 on the Harare-Johannesburg route.
"If we remain undercapitalised, it will certainly further erode the market share. Our market share versus South African Airways is quite low. We control 30 percent of the Johannesburg route and market, whilst SAA accounts for about 50 percent market and British Airways slightly below 20 percent," Mavhunga said.
Foreign airlines operate new generation aircraft, which are up to 40 percent more fuel efficient compared to AirZim's obsolete fleet and, according to Mavhunga, fuel is a huge cost driver in the industry rendering his company's 23-year- old fleet uncompetitive.
Source - Daily News
