Air Zimbabwe aircraft seized by South African creditor

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Bid Air Services on Friday seized one of Air Zimbabwe’s Boeing 737-500 aircraft over outstanding debt in the latest setback for the struggling carrier.

The 737 was seized at OR Tambo International Airport shortly after landing, with Bid Air parking a vehicle behind the aircraft to make sure it did not leave the tarmac. Bid Air was demanding US$500 000 for ground handling services it said it was owed by the airline.

Bid Air allowed the 737 to return to Zimbabwe and gave the airline until tomorrow to settle its debt. Air Zimbabwe urgently needed the aircraft as it was scheduled to fly President Robert Mugabe to a conference in Victoria Falls yesterday. According to the Sunday Times, the aircraft is the only Air Zimbabwe aircraft currently flying. Last week international flights were suspended due to a shortage of spares.

Last month Air Zimbabwe halted flights for a week whilst it resolved a payment dispute with fuel suppliers. Zimbabwe’s flag carrier cancelled overseas flights, leaving passengers in Harare, Beijing, Kuala Lumpur and London stranded.
“Air Zimbabwe is failing to pay for fuel, forcing suppliers, who are owed in excess of US$1 million, not to deliver the commodity occasionally,” an official said.
“Air Zimbabwe requires a complete and proper restructuring which is in the interest of the nation. Pointing figures and labelling each other is not helping the problem,” Air Zimbabwe chairman Jonathan Kadzura said. “The shareholder (government) must have interest and be responsible in all that transpires at the national airline. That is the only way it can be revived.”

In October Transport Minister Nicholas Goche said the government would take over Air Zimbabwe’s US$113 million domestic and US$25 million foreign debt and would find a strategic partner to buy into the airline, but will not privatise it. The minister said the airline was a strategic asset that should be preserved and supported, VOA News reported.

Other turnaround measures will include laying off workers and partially dispose of the National Handling Services.

Air Zimbabwe is losing US$3.5 million a month, rapidly increasing its level of debt, which was only US$6 million in 2006.
“On internal debt, statutory obligations to companies like the Zimbabwe Revenue Authority and the National Social Security Authority account for US$38 million, loans from the ministry of transport are up to US$26 million, deferred staff salaries and allowances are US$20 million plus US$12.3 million from our overdraft facility with our banks,” Air Zimbabwe Chief Executive Officer Innocent Mavhunga said.
“Our external debt comprises US$4.6 million to the International Air Transport Association and another US$4 million to Global Systems. We also owe our aircraft spares and parts suppliers some money and I think we have about US$5 to US$8 million for navigation services.”

Mavhunga said Air Zimbabwe’s dismal financial situation was due to sanctions and, during the era of the Zimbabwe dollar, the government’s refusal to charge in foreign currency. Other reasons for the airline’s poor performance were repeated pilot strikes, high operational costs from ageing aircraft, reduced passenger confidence in the airline and government interference.
“AirZim has been operating under a deficit since the 1990s and this worsened at the inception of the multiple currency regime,” Mavhunga siaid. “We have become less competitive, hence we have to price our fares slightly below our competitors.”

Several Air Zimbabwe aircraft were earlier this year grounded due to safety concerns and a leased aircraft was taken back after Air Zimbabwe could not pay for it. Such incidents have resulted in a big drop in passenger numbers and some Air Zimbabwe flights this year have flown almost completely empty.

Declining passenger numbers have forced the airline to reduce the number of destinations it services. It currently flies to Harare, Johannesburg, Lusaka, Bulawayo, Victoria Falls and Lubumbashi locally and Malaysia, China and the UK internationally.

Foreign carriers have been taking over the domestic market. “Our market share versus South African Airways is quite low. We control 30% of the Johannesburg route and market, whilst SAA accounts for about 50% of the market and British Airways slightly below 20%,” Mavhunga said.



Mavhunga said that Air Zimbabwe needs to be privatised and needs to retrench 400 employees from its bloated workforce of more than a thousand employees in order to cut costs. The airline consistently struggles to pay its workforce – something that has led to repeated pilot strikes.