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AfDB advises government on Air Zimbabwe

by Staff reporter
24 Nov 2019 at 18:16hrs | Views
INSOLVENT national flag carrier Air Zimbabwe must focus its efforts on optimising routes to reduce operating costs and replace aging, high cost planes used on domestic routes with smaller planes that will operate with higher load factors, the African Development Bank (AfDB) has said.

In its 2019 infrastructure report, AfDB said Air Zimbabwe's future was uncertain.

The national carrier has gone through multiple restructuring exercises dating back to pre-independence.

However, the core challenges persist and pertain to AirZim's inability to attract passengers and cargo.

The airline carries about 180 000 passengers a year, according to 2017 figures, and has been operating at a loss for many years.

"In the short term, the airline should focus its efforts on optimising routes to reduce operating costs and replace aging, high cost planes used on domestic routes with smaller planes that will operate with higher load factors," the AfDB report reads.

"In the medium term, Air Zimbabwe should seek to convert a substantial portion of accounts payable to medium- or long-term debt through refinancing.

"Such an arrangement would provide Air Zimbabwe with the funds required to meet all of its overdue obligations for accounts payable and restore services that can generate revenue."

In 2018, the parastatal was placed under financial administration and plans are currently being drawn up for the restructuring of the organisation and a financial turnaround plan.

The airline is saddled with a legacy debt of about US$380 million.

Of this figure, US$30 million is owed to foreign creditors while US$292 million is government-to-government debt.

AirZim immediately requires US$45 million to be operational, according to AirZim's Strategic Turnaround Plan (2018-2020).

It requires US$26 million to settle its foreign debt; US$6 million to buy three Embraer ERJ145 and US$4,6 million for International Air Transport Association clearing house joining fees, among other financial obligations.

AirZim, which inherited 18 aircraft in 1980, got a timely boost after receiving an Embraer ERJ145 plane, which had previously been earmarked for Zim Airways.
But reports indicate that the airline is yet to take off due to the absence of an operating manual.

Meanwhile, AfDB said since government had proposed the full privatisation of both TelOne and NetOne, one possible option to consider was the merger of the two state enterprises and sell them as a single entity.

The total assets of the two companies in 2015 were about US$808 million, with liabilities at US$904 million, largely because of the low profitability of NetOne.

In 2015, these two enterprises had revenues of about US$251 million and at end of the same year; they had a combined total of US$86 million of deferred tax obligations to the government and long-term liabilities of US$295 million.

"The attractiveness of these two enterprises for full privatisation would be further improved if the government were to act to reduce the US$204 million of accounts receivable for TelOne (information for accounts receivable for NetOne is not available)," the report added.

"Other actions to be considered include a write-off of the US$86 million in deferred tax obligations, and transfer of the LT loans in arrears to the special purpose (fund)."

Source - the standard

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