Business / Companies
Air Zimbabwe enters into a controversial deal
29 Nov 2013 at 05:51hrs | Views
In a bid to turn around its fortunes, national carrier Air Zimbabwe has entered into a controversial deal that may amount to "privatisation by stealth", according to Movement for Democratic Change MP Eddie Cross.
Cross, the Bulawayo South lawmaker who is also a member of the public accounts committee, told the Mail & Guardian this week that the fortunes of the airline are improving, but that it is mainly due to an opaque deal it reached to lease two Airbuses from the Far East.
"I have it on good authority that the Far East company is a front for diamonds firm Mbada Diamonds. What we might be witnessing is privatisation by stealth. The deal is working quite well because the services are good and the airline is back on its feet, but that deal is not transparent and has not been made public," said Cross.
"We are waiting to review the financial statements of Air Zimbabwe in the public accounts committee, but the statements are yet to be made available. We will get them and, if there is any cause, we will have a public hearing. There have been major changes in the past six months. [The airline has] also bought an aircraft from Brazil."
Cross commended the service Air Zimbabwe is now offering, but said the problem is that the deals that are bringing it back to its feet are not transparent.
Transport Minister Obert Mpofu, who was also the minister of mines when the deal was signed, told the M&G that he did not know from whom Air Zimbabwe was leasing its two Airbuses.
Deputy Minister of Transport and Infrastructure Development Petronella Kagonye told the Senate last week that Air Zimbabwe is not yet financially stable because of an overall "legacy" debt of close to $180-million.
She said the airline is not in a position to resume long-haul flights to London and Beijing, because it fears its aircraft will be attached due to the debt it has incurred in those destinations.
"These [routes] will be serviced when outstanding obligations on those routes amounting to $32-million have been paid off," she said.
Kagonye said that the airline is breaking even and has resumed its local and regional flights to Johannesburg.
"Air Zimbabwe is now providing a normal service on the domestic routes, particularly Harare to Bulawayo and Harare to Victoria Falls. Furthermore, the airline is also servicing the Harare to Johannesburg route, Bulawayo to Johannesburg and the Victoria Falls to Johannesburg routes," said Kagonye.
Problems at the airline have included political interference, mismanagement, debt overhang, low load factors and overstaffing.
At its peak, Air Zimbabwe serviced 25 routes and carried a million passengers a year, but currently cannot afford to fly more than five routes.
Among the routes suspended are those servicing the Democratic Republic of Congo, Dubai, Nairobi, Dar-es-Salaam, Kariba, Masvingo, Buffalo Range and Guangzhou in China.
The Harare-London route as well as the Harare-Singapore-Beijing route were also affected.
In 2010, a report by the parliamentary committee on transport said Air Zimbabwe's debt was not a result of borrowings but stemmed from nonpayment to service providers.
The problems resulted in the airline being periodically suspended by the global clearing house, the International Air Transport Association.
That parliamentary report said at the time that the airline's top five creditors had taken Air Zimbabwe to court because of nonpayment.
It was also revealed that there were court rulings in France that empowered creditors to impound Air Zimbabwe aircraft at any time without notice.
The airline had reportedly also received warnings to suspend its services from British Airport Authorities and American General Supplies, which is also Air Zimbabwe's major supplier of aircraft spares.
No payments have been made to the carrier's creditors and the debt has grown from $64-million in 2010 to the current figure of $180-million.
"The ageing fleet was said to be another major challenge in attracting passengers," the parliamentary committee report said.
"The committee was informed that the average age of Air Zimbabwe's fleet was 20 years for the Boeing 767 and 23 years for the Boeing 737. It was submitted that the average economic life for an aircraft is 15 years.
"Air Zimbabwe's aircraft are less appealing compared with other airlines' and this has an impact on passenger choice and costs," the report said.
Because of the lack of "clear-cut separation of powers" between management, board and transport ministry, the parliamentary committee recommended that Air Zimbabwe should be run as a company and not as a government department.
In the past, the government has resisted calls to privatise the airline and instead gave it an $8.5‑million lifeline to implement its turnaround strategy.
Cross, the Bulawayo South lawmaker who is also a member of the public accounts committee, told the Mail & Guardian this week that the fortunes of the airline are improving, but that it is mainly due to an opaque deal it reached to lease two Airbuses from the Far East.
"I have it on good authority that the Far East company is a front for diamonds firm Mbada Diamonds. What we might be witnessing is privatisation by stealth. The deal is working quite well because the services are good and the airline is back on its feet, but that deal is not transparent and has not been made public," said Cross.
"We are waiting to review the financial statements of Air Zimbabwe in the public accounts committee, but the statements are yet to be made available. We will get them and, if there is any cause, we will have a public hearing. There have been major changes in the past six months. [The airline has] also bought an aircraft from Brazil."
Cross commended the service Air Zimbabwe is now offering, but said the problem is that the deals that are bringing it back to its feet are not transparent.
Transport Minister Obert Mpofu, who was also the minister of mines when the deal was signed, told the M&G that he did not know from whom Air Zimbabwe was leasing its two Airbuses.
Deputy Minister of Transport and Infrastructure Development Petronella Kagonye told the Senate last week that Air Zimbabwe is not yet financially stable because of an overall "legacy" debt of close to $180-million.
She said the airline is not in a position to resume long-haul flights to London and Beijing, because it fears its aircraft will be attached due to the debt it has incurred in those destinations.
"These [routes] will be serviced when outstanding obligations on those routes amounting to $32-million have been paid off," she said.
Kagonye said that the airline is breaking even and has resumed its local and regional flights to Johannesburg.
"Air Zimbabwe is now providing a normal service on the domestic routes, particularly Harare to Bulawayo and Harare to Victoria Falls. Furthermore, the airline is also servicing the Harare to Johannesburg route, Bulawayo to Johannesburg and the Victoria Falls to Johannesburg routes," said Kagonye.
Problems at the airline have included political interference, mismanagement, debt overhang, low load factors and overstaffing.
At its peak, Air Zimbabwe serviced 25 routes and carried a million passengers a year, but currently cannot afford to fly more than five routes.
Among the routes suspended are those servicing the Democratic Republic of Congo, Dubai, Nairobi, Dar-es-Salaam, Kariba, Masvingo, Buffalo Range and Guangzhou in China.
The Harare-London route as well as the Harare-Singapore-Beijing route were also affected.
In 2010, a report by the parliamentary committee on transport said Air Zimbabwe's debt was not a result of borrowings but stemmed from nonpayment to service providers.
The problems resulted in the airline being periodically suspended by the global clearing house, the International Air Transport Association.
That parliamentary report said at the time that the airline's top five creditors had taken Air Zimbabwe to court because of nonpayment.
It was also revealed that there were court rulings in France that empowered creditors to impound Air Zimbabwe aircraft at any time without notice.
The airline had reportedly also received warnings to suspend its services from British Airport Authorities and American General Supplies, which is also Air Zimbabwe's major supplier of aircraft spares.
No payments have been made to the carrier's creditors and the debt has grown from $64-million in 2010 to the current figure of $180-million.
"The ageing fleet was said to be another major challenge in attracting passengers," the parliamentary committee report said.
"The committee was informed that the average age of Air Zimbabwe's fleet was 20 years for the Boeing 767 and 23 years for the Boeing 737. It was submitted that the average economic life for an aircraft is 15 years.
"Air Zimbabwe's aircraft are less appealing compared with other airlines' and this has an impact on passenger choice and costs," the report said.
Because of the lack of "clear-cut separation of powers" between management, board and transport ministry, the parliamentary committee recommended that Air Zimbabwe should be run as a company and not as a government department.
In the past, the government has resisted calls to privatise the airline and instead gave it an $8.5‑million lifeline to implement its turnaround strategy.
Source - M&G
