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Troubled AirZim seeks $190m

By Andrew Kunambura

Beleaguered national flag carrier, Air Zimbabwe (AirZim), is pleading for a $190 million capital injection from its sole shareholder, government, to fund its revival. Saddled with a debt overhang of over $300 million, the State-run airline has an ambitious plan to acquire several planes, lease some and retire its debts.

Air Zimbabwe grounded.... hit by fuel shortages
Air Zimbabwe

According to a 2018-2019 strategic turnaround document exclusively obtained by the Daily News, AirZim intends to procure three Brazilian assembled 50-seater Embraer jetliners, suitable for domestic and short regional routes, on an urgent basis.

This will significantly reduce overheads incurred on domestic routes, where the airline has been operating the B737s, or even the much bigger B767s.

The airline might expend $6 million for the budget planes, at an estimated cost of $2 million each.

The Embraer ERJ family is a series of twin-engine jets produced by Embraer, a Brazilian aerospace company.

Plans are also afoot to enter into a lease deal, in the short-term, for two planes at a cost of $2 million.

In the long run, the plan is to purchase four lager planes, Boeing B777 at a total cost of $56 million and another ERJ145 within the next 12 months.

AirZim has also budgeted $8 million for two cargo planes — Boeing B737-300Fs — at $4 million each and a further $500 000 for a medical rescue fleet; a Bell 206 BIII whose price is set at $350 000 and Mooney M20R Ovation, costing $150 000.

It also hopes to use $13 million to clear its longstanding debt with European Aviation Safety Agency (Easa) to allow it to start servicing the lucrative European routes from which it was barred on safety grounds.

“The immediate (urgent), immediate (up to three months), short-term, medium and long-term requirements will require an injection of working capital resources amounting to $189,2 million in order to ensure rejuvenation of the national airline.

“A total of $13 million is required immediately to finance the Easa closure of audit findings to enable the airline to resume the European flights, particularly the Harare-London route. The balance of $176,2 million is required in the subsequent period,” the blueprint reads in part.

Some of the money will be used to pay the audit and re-joining fee to the International Air Travel Association.

AirZim was de registered from the global aviation safety organisation registry for failing to comply with regulations in November 2016 and still owes the body $4,6 million.

The airline is also seeking to clear its foreign debt which has ballooned to $26 200 000 over the past few years.

“The total funding requirements are spread over three years and once initial capital is injected, operations revenue will support some of the projects,” the document reads.

In the event that government fails to avail the required funding, AirZim has suggested several other alternative financing options, including seeking private funding; entering into a hire purchase arrangement and arranging a strategic partnership.

Transport and Infrastructural Development minister Joram Gumbo has previously told the Daily News that potential strategic partnerships with other successful airlines such as Air Malaysia, Fly Emirates, Ethiopian Airways and Lufthansa has failed to materialise after they were scared off by the company’s high level of indebtedness.

AirZim contends that if the blueprint is implemented successfully, the airline will return to profitability by the end of the year as it would be able to compete with the regional and global aviation giants.

The document says AirZim has capacity to make a profit of $200 000 by December 2018, gradually rising to $22 million a year by 2020 due to improved load factors.

“Air Zimbabwe is aiming to grow its route network and compete with other established continental and global airlines like Ethiopian Airlines, Kenya Airways, South African Airways, Emirates Airlines and British Airways-ComAir,” the document further reads.

Gumbo confirmed the blueprint saying it had government’s support.

“I am happy to advise the nation that the road map for Air Zimbabwe for the next three years to revive and sustain the viability of the airline is now in place. I have no doubt the board, management and employees are all committed to move this process forward. Government, as the shareholder stands ready to support their efforts. I therefore wish them well in their implementation of this strategic turnaround plan,” said Gumbo.

AirZim board chairperson Chipo Dyanda could not be reached for comment.

However, in her foreword to the blueprint, she said the document was a product of wide consultations.

“In order to ensure the development of a responsive strategic turnaround plan, the process was deliberately consultative, involving a wide range of stakeholders and clients. It emerged clearly from these consultations that although lack of recapitalisation appeared to be the main problem, there were other factors that contributed to the downward spiral of the airline,” she said. DailyNews