Air Zimbabwe in huge debt, needs 1 billion USD bailout

Published on : Tuesday, May 19, 2015

indexIn order to turn around its fortunes and enable it to operate in a viable manner, national flag carrier Air Zimbabwe requires a 1.0 billion USD bailout. The national flag carrier is posting a monthly loss of 3.0 million US dollars, says Transport and Infrastructure Development Minister Obert Mpofu.

 

He told Parliament in Harare on Monday that the proposed bailout would include 770 million USD to purchase new aircraft while the remainder would be used to pay off the airline’s 300 million USD legacy debt.

 

“The estimated costs of 770 million USD for new equipment plus a debt of 298 million USD implies that the government must inject a minimum of 1.06 billion USD,” Mpofu told the Parliamentary Committee on Transport and Infrastructure Development.

 

“Given the prevailing demands on the fiscus, it is not conceivable that the shareholder can inject the required capital into Air Zimbabwe hence the need for a strategic technical partner.”

 
He said finding a new technical partner would be a step towards re-energising the airline but the initiative was being hamstrung by the debt burden.

 

Mpofu said his ministry had since come up with a new list of potential technical partners which would be submitted to Cabinet for selection.

 

The national airline, which employs about 760 people, currently has five operational aircraft — two Boeing 767s, one Boeing 737, one Xian MA 60 turboprop and one Airbus A320.

 

Mpofu said the planes were old and expensive to maintain, which was milking the airline. “Air Zim is a loss-making entity, generating estimated revenues of 2.65 million USD a month against an operational expenditure of 5.94 million USD a month,” he said.

 

In order to be able to turn around its performance and compete with its peers, Mpofu said Air Zimbabwe needed to acquire seven new planes, three small jets, two Boeing 737s and two Boeing 787s, at a total cost of 770 million USD.

 
He said the government had also agreed to take over the airline’s debt to make it attractive to possible suitors. Most of the airline’s debt derived from, among others, navigation, landing and handling fees, fuel supplies, rentals and salaries.

 

Mpofu said some foreign institutions owed by the airline had threatened to have its aircraft confiscated if ever they flew to some Western destinations. This has in turn constrained the airline in terms of the routes that it can service until it has addressed the debt issue.

 

As a result, Air Zimbabwe is flying only one regional route, South Africa while other routes are local. The airline has indicated plans to widen its routes to new destinations in Africa.

 

Despite the problems, Mpofu confidently told the committee that “Air Zim has a future, a big future.”

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