BY TINASHE KAIRIZA
The national carrier, Air Zimbabwe (AirZim), recorded a loss of $ 137 million in four consecutive years, which helped to plunge the airline deep into the abyss under the yoke of corporate mischief, the incompetence, government interference and systemic corruption, a confidential document that has so far been kept under the guise of shows.
Although the beleaguered airline has been in gradual decline, its four-year loss streak, which marked the culmination of its spectacular crash, coincided with the appointment of former President Robert Mugabe’s son-in-law, Simba Chikore, to the closed off. , and the establishment of an obscure company called ZimAirways with public funds.
At that time, Chikore, who appeared in court for his controversial role in AirZim’s financial affairs, was also the head of both airlines.
The deficit sequence which extends from 2014 to 2018 is revealed in the Reconstruction report which also highlights the depth of the crisis.
The report was prepared by airline administrator Grant Thornton.
As shown by the report which has not yet been published, seen by the Independent Zimbabwe This week, a timeline marking the trajectory of how the entity’s airline plunged into insolvency reveals that it fully grounded operations in 2011, giving way to a headwind of challenges characterized by a severe shortage of currencies.
The state-owned airline only resumed operations in 2013, but with leaner staff, outdated flight routes and a fleet of aircraft, most of which had been phased out by modern airlines.
In the report prepared by Grant Thronton administrator Reggie Saruchera, AirZim recorded a loss of US $ 40,106,258 in 2014 with expenses totaling US $ 71,500,902.
The following year, the airline recorded a loss of US $ 28,857,563 and incurred expenses of US $ 61,736,856. The income generated amounted to US $ 32,879,293.
As operational challenges persisted, compounded by a liquidity squeeze in the economy, the state-owned airline recorded a loss of US $ 22,289,335 while expenses amounted to US $ 56,506,380.
From 2017 to 2018, AirZim recorded losses of US $ 33,110,078 and US $ 14,287,913, respectively. In 2017, spending was $ 62,243,488 and fell almost 50% in 2018 to $ 31,383,917.
The airline was placed under reconstruction in 2018.
Grant Thornton, summarizing the disastrous financial affairs of AirZim, noted that: “The historical unaudited financial statements for the four-year period ending December 31, 2017, show that the airline has experienced persistent losses characterized by declining of his income.
“Air Zimbabwe’s operating aircraft have gone from a peak of seven in 2009 to two in 2018. In addition, the equipment used is over 25 years old, resulting in high operating costs. The airline operates in an environment where it earns most of its revenues from local RTGS. We note, however, that most of the airline’s costs are denominated in foreign currency. “
The confidential document, prepared on November 28, 2018, was handed over to the late Minister of Transport Joel Biggie Matiza, Minister of Justice Ziyambi Ziyambi and AirZim’s creditors.
When the document was prepared, AirZim’s liabilities soared to US $ 380 million with a portfolio of assets worth US $ 127 million.
The cumulative debt amounted to US $ 370 million, of which US $ 30 million was foreign liabilities. Subsequently, it was declared non-continuous.
In his Reconstruction Report, the Administrator pointed out, “As of October 4, 2018, AirZim’s total liabilities exceeded assets by US $ 253,429,048, therefore the company is insolvent.”
Over the years of its systematic collapse, the ailing airline has been suspended by various international aviation affiliates for failure to pay subscription fees and other related charges.
For example, in May 2011, the airline was suspended from the International Aviation Ticketing Association (Iata) reservation system due to unpaid fees that had accumulated to US $ 4.4 million.
Amadeus, the main supplier to the South African market, disconnected AirZim in March 2018 on an outstanding debt of 399,634.81 euros.
As a result, AirZim lost its ability to “tap into passenger and freight revenues. It is now based solely on point-to-point traffic revenues ”.
There are also challenges in quickly and efficiently transferring funds “to and from counterpart airlines and travel partners”, as observed in the Administrator’s Reconstruction Report which the government failed to deliver. public but seen by the Independent.
In May 2017, AirZim was also banned from flying in or over EU airspace after an unfavorable Iata Operational Safety Audit (Iosa) audit.
It was also suspended by Travelport, an international provider of passenger and departure inventory management.
By the time the besieged airline was placed in reconstruction, it owed a total of US $ 205,995,263 to government-related entities and a debt of US $ 86,415,987 to its line ministry.
The confidential reconstruction exercise proposes a series of short-term measures to prevent the airline from bleeding, reduce operational costs and increase revenue, among other interventions to resuscitate the ailing entity.
It proposes to “streamline operations, redeploy the current fleet, increase flight frequencies on profitable routes and expand route networks targeting Lilongwe, Lusaka, Cape Town and Durban”.
“In this regard, we propose that the government reserve an allocation of between 2% and 5% in foreign exchange from the tourism, trade and industry sectors to enable the airline to meet its foreign exchange commitments.”
Saruchera’s report also stressed that it was imperative for the airline on the ground to join international aviation associations in settling its arrears.
At least $ 42,000 was needed in 2018 to regularize Iosa certification, while $ 4.4 million was needed to “become a member of the Iata clearing house”.
At the time of writing, the administrator had hired the central bank to guarantee a loan facility that would be funneled into the purchase of modern planes.
“The immediate measures proposed (include) the establishment of loan facilities to guarantee the acquisition of aircraft. This loan will have super priority over the inherited debt. RBZ has confirmed that it has an LC (Letters of Credit) facility through which it can support the acquisition of narrow-body aircraft. “
The administrator also stresses the importance of coming up with a debt settlement plan with the various creditors of the airline.
The report proposes “to consider rescheduling the debt of the pre-reconstruction order over a period of three to five years and to consider a debt swap for shares.” Engage the government and explore the following, debt assumption and the availability of foreign currency collateral necessary to serve foreign creditors over an agreed period of time ”.
During the first phase of the reconstruction exercise, AirZim was notably authorized to “hire two Boeing 767s to support the immediate recovery and collect foreign currency air tickets for all passengers arriving from Zimbabwe”.
He was also authorized to purchase Embraer ERJ 145 and B737-700.
In the second phase of the reconstruction program, AirZim received the mandate from the government, being the sole shareholder, to identify a strategic partner and to join Iata.
The government also pledged to take on the airline’s debt while also acquiring four aircraft for the airline.
According to the report seen by this publication this week, the administrator also proposed, in the long run, to use profitable routes such as Harare-London and Harare-Mumbai-Guangzhou.
First, the administrator considered that given the enabling role played by the airline in the economy and in particular in the tourism sector, AirZim could be transformed into a viable entity.
“It is therefore the director’s considered opinion that Air Zimbabwe can be restructured and reorganized in order to operate as a viable and sustainable company.”
The ongoing reconstruction exercise has been extended several times.
Saruchera could not be reached for comment.