13 April 2017

Zimbabwe: Airzim Planes Grounded

Photo: Flickr
(File photo).

STRUGGLING national flag carrier Air Zimbabwe (AirZim) has lurched into a new crisis after all of its five aircraft were grounded on Tuesday due to technical problems, forcing the airline to hire a plane from neighbouring South Africa in a desperate effort to fulfill some of its flight schedules, it has been established.

AirZim, which at Independence in 1980 boasted a fleet of 18 planes, is technically insolvent and operating at less than a third of that capacity.

The airline is reeling under a debt in excess of US$330 million that has hampered efforts to engage strategic partners in a bid to retain and grow market share.

Foreign currency shortages that have seen the nostro accounts of local banks depleted have ground AirZim's operations to a halt as the company struggles to procure crucial spare parts.

Sources said this week the airline's woes worsened last month after it failed to service most of its routes, leaving passengers stranded. AirZim executives blamed the Reserve Bank of Zimbabwe for delaying the release of foreign currency to buy spare parts needed for maintenance work.

The sources said one of AirZim's Modern Ark (MA) 60 planes, which was servicing domestic routes, is awaiting spare parts bought from China while Boeing planes are also awaiting spares from suppliers.

Pilots at the airline, sources said, are also up in arms with management amid concerns the problems dogging AirZim could complicate renewal of their licences, an international requirement dependent on their flying hours.

"The situation at AirZim really got bad on Tuesday. No past chief executive has ever experienced what happened when five planes were grounded for being un-airworthy. By late Tuesday frantic efforts were being made to bring back one bird to the sky. As of Wednesday the Airbus was operational and it was servicing the Victoria Falls route," said an aviation industry source.

Questions sent to AirZim chief executive Ripton Muzenda were not responded to while his phone went unanswered. Transport minister Jorum Gumbo's phone was not reachable.

Insiders say Zimbabwe's cash situation worsened last year on the back of dwindling exports, externalisation and government's growing dependence on Treasury Bills which has crowded out private sector lending.

The deteriorating economic situation has seen international airlines like Qantas ordering travel agents in Zimbabwe to stop selling tickets for its flights after the International Air Transport Association (Iata) warned it is getting harder to move funds out of the country due to foreign currency shortages.

This comes as government decided to go it alone in turning around the airline, abandoning previous considerations to get a technical partner.

Late last year government engaged five international carriers from Kenya, Ethiopia, Singapore, Turkey and Malaysia to partner the troubled Air Zimbabwe with hopes of turning around the fortunes of the ailing and debt-ridden national airline.

Ethiopian Airlines, Africa's largest carrier, recently told the Zimbabwe Independent that it is ready to rescue AirZim, but this depends on the will of the government.

Last year, cabinet gave Gumbo the nod to seek private partnerships for the debt-ridden flag carrier.

The national airline has continued to struggle, incurring cumulative losses and relying on Treasury for survival.

In 2011, Air Zimbabwe's Boeing 737-500 was impounded in South Africa after failing to settle a US$500 000 debt owed to Bid Air Services for ground handling services.

Its largest aircraft, a Boeing 767-200, was seized by American General Supplies in London over a US$1,2 million debt in the same year. The plane was later released after the airline paid the debt, but Air Zimbabwe immediately stopped flying to London, one of its most lucrative routes.

The debt-ridden airline was kicked out of Iata's flight reservation services in 2012 after failing to honour its obligations -- which then stood at US$3,4 million -- a development which resulted in limited business.

In 2013 cabinet approved a proposal by the AirZim board to raise US$15 million through 180-day commercial paper.

The airline also proposed the issuance of ordinary shares to raise US$30 million through private placement to local investors and the issuance of ordinary shares and preference shares to international investors and partners.

To clean up its balance sheet and shake off legacy issues, the AirZim board proposed the restructuring of the current debt through the issuance of money market instruments to current creditors.

The company also planned to issue 10-year corporate bonds to current creditors and third-party investors up to US$200 million to reduce the debt overhang affecting the entity.

Officials have been on roadshows canvassing for investors.

During that same year, the Transport ministry commissioned audit firm Ernst & Young to develop a business plan for AirZim which was approved by cabinet.

Government has agreed to take over the debts, through the Air Zimbabwe Debt Assumption Bill, to allow the airline and its technical partner to start on a clean slate.

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