Business / Companies
Air Zimbabwe loses $2m monthly
22 Aug 2017 at 12:46hrs | Views
HARARE - State-owned Air Zimbabwe (AirZim) is reporting huge losses of $2 million every month as mismanagement, high operating costs, old equipment and aircraft that are no longer profitable to fly weigh on its bottom-line.
This comes as the loss-making carrier has cut 200 jobs, its biggest head-count reduction in almost two decades, as it seeks to return to profitability in an industry battered by falling ticket sales.
In addition to shocking losses, it has had to contend with competition from mainland airlines that are expanding local routes aggressively.
Transport and Infrastructural Development minister Joram Gumbo told the Daily News the grievous losses had rendered the State-run aviation business untenable.
The airline is saddled with a $300 million debt comprising salary arrears, outstanding taxes, payments to the national pension fund and employee health insurance and foreign debts and has been relying on infrequent bailouts.
The AirZim board last month retrenched 200 employees in the hope that the decision would rescue the airline, but Gumbo said the situation has not paid any dividends yet.
"Air Zimbabwe is running at a deficit. The monthly financial reports show that the airline is making huge losses of up to $2 million every month. This is bad, we can't continue like this," Gumbo said.
This means AirZim has so far made a massive $14 million loss in the first seven months of the year.
Gumbo said the State-run airline cannot meet its insurance, service and fuel costs and persistently approaches government seeking rescue packages.
"Every week, there is a financial request from Air Zimbabwe, either to pay for insurance or parts needed to repair planes," he said.
"There are big weekly requests asking for fuel and we have had to intervene. Our planes are not enough to sustain the business. We have just three planes that fly, that are fully functional.
"We have had to be realistic and look at things as they are. We can't pretend that things are okay when they are not. The aviation industry the world over is not doing well so far and we have not been spared from the global aviation crunch," he said.
Gumbo said AirZim was also struggling with debt overhang; outstanding salaries and wages; distorted administration systems; bloated staff complement; top-heavy management - which last month's retrenchment sought to address - and limited route network consisting of local and two regional flights, namely South Africa and Tanzania, that can hardly attract enough revenue to pull it out of the financial swamp.
In fact, the carrier came close to insolvency when it stopped flights in 2011 before government, its sole shareholder, decided to let it hit the skies the following year.
AirZim's aged fleet currently comprises two Boeing 767s, three B737s, three MA60s and two Airbus A320s.
Out of these planes, only four are flying - one Airbus, one Boeing 767, one 737 and an MA60, with only two in operation currently.
At independence in 1980, AirZim boasted a fleet of 18 planes.
Passenger numbers have also plummeted to about 230 000 per annum in the past few years, from a peak of one million in 1996, as travellers opt for other airlines on the four domestic destinations it services.
There have been cases where AirZim planes have flown just two or three passengers, especially on the Johannesburg-Harare route which is also being serviced by global aviation giants, British Airways, Emirates Airlines and South African Airways.
The airline has been planning to resume the profitable Harare-London flights, which have so far failed to materialise, with aviation experts warning that it was impossible without modern aircraft which would make it more competitive.
The airline is also battling to get readmission into the International Air Transport Association (Iata).
The airline was kicked out of Iata after failing to pay the fees. Aviation authorities around the world are cagey dealing with non-Iata compliant airlines.
The Iata Operational Safety Audit (Iosa) is the benchmark for global safety management in airlines.
This comes as the loss-making carrier has cut 200 jobs, its biggest head-count reduction in almost two decades, as it seeks to return to profitability in an industry battered by falling ticket sales.
In addition to shocking losses, it has had to contend with competition from mainland airlines that are expanding local routes aggressively.
Transport and Infrastructural Development minister Joram Gumbo told the Daily News the grievous losses had rendered the State-run aviation business untenable.
The airline is saddled with a $300 million debt comprising salary arrears, outstanding taxes, payments to the national pension fund and employee health insurance and foreign debts and has been relying on infrequent bailouts.
The AirZim board last month retrenched 200 employees in the hope that the decision would rescue the airline, but Gumbo said the situation has not paid any dividends yet.
"Air Zimbabwe is running at a deficit. The monthly financial reports show that the airline is making huge losses of up to $2 million every month. This is bad, we can't continue like this," Gumbo said.
This means AirZim has so far made a massive $14 million loss in the first seven months of the year.
Gumbo said the State-run airline cannot meet its insurance, service and fuel costs and persistently approaches government seeking rescue packages.
"Every week, there is a financial request from Air Zimbabwe, either to pay for insurance or parts needed to repair planes," he said.
"There are big weekly requests asking for fuel and we have had to intervene. Our planes are not enough to sustain the business. We have just three planes that fly, that are fully functional.
"We have had to be realistic and look at things as they are. We can't pretend that things are okay when they are not. The aviation industry the world over is not doing well so far and we have not been spared from the global aviation crunch," he said.
Gumbo said AirZim was also struggling with debt overhang; outstanding salaries and wages; distorted administration systems; bloated staff complement; top-heavy management - which last month's retrenchment sought to address - and limited route network consisting of local and two regional flights, namely South Africa and Tanzania, that can hardly attract enough revenue to pull it out of the financial swamp.
In fact, the carrier came close to insolvency when it stopped flights in 2011 before government, its sole shareholder, decided to let it hit the skies the following year.
AirZim's aged fleet currently comprises two Boeing 767s, three B737s, three MA60s and two Airbus A320s.
Out of these planes, only four are flying - one Airbus, one Boeing 767, one 737 and an MA60, with only two in operation currently.
At independence in 1980, AirZim boasted a fleet of 18 planes.
Passenger numbers have also plummeted to about 230 000 per annum in the past few years, from a peak of one million in 1996, as travellers opt for other airlines on the four domestic destinations it services.
There have been cases where AirZim planes have flown just two or three passengers, especially on the Johannesburg-Harare route which is also being serviced by global aviation giants, British Airways, Emirates Airlines and South African Airways.
The airline has been planning to resume the profitable Harare-London flights, which have so far failed to materialise, with aviation experts warning that it was impossible without modern aircraft which would make it more competitive.
The airline is also battling to get readmission into the International Air Transport Association (Iata).
The airline was kicked out of Iata after failing to pay the fees. Aviation authorities around the world are cagey dealing with non-Iata compliant airlines.
The Iata Operational Safety Audit (Iosa) is the benchmark for global safety management in airlines.
Source - Daily News
