Air Zimbabwe is technically insolvent and must urgently review its strategic plan to transform itself into a vibrant entity, a Parliamentary Portfolio Committee has heard.
In a report presented before Parliament on Thursday, the Transport and Infrastructural Development Parliamentary Portfolio Committee chaired by Chegutu West legislator, Mr Dexter Nduna, the airline is generating an estimated revenue of $2.65 million a month against an operational expenditure of $5.94 million.
It said the committee noted with concern that Air Zimbabwe has failed right from the onset to implement what they had proposed as a strategic plan to mitigate the financial challenges.
“The committee observed that Air Zimbabwe is technically insolvent and may not be a going concern due to operational losses that have eaten into the company’s assets and increased the debt with each day’s operation,” said the report.
“The situation obtaining at Air Zimbabwe was attributed to deteriorating operational performance which started around 2004, owing to the use of obsolete equipment, a situation which gave competitive advantage to its competitors, low tourist arrivals, erratic schedule operations, impounding of the B767 in London and temporary suspension of operations between 2011 and 2012.”
The committee established that Air Zimbabwe was facing operational challenges arising from a number of factors ranging from high operational costs, low load factors and an accumulation of a cripplingly huge financial debt
The airline had been running losses over the years . . . there was need to urgently develop and implement a robust strategic plan that would be geared towards ending operational challenges,” it said.
The ailing parastatal has a huge debt overhang amounting to about $298 million, which is owed to various local and foreign creditors. Air Zimbabwe requires a minimum capital injection of $1.068 billion.
In 2014, Air Zimbabwe board submitted a strategic plan that sought to bring back the national airline to sustainable profitability through a three-phased approach.
It said lack of the company’s audited financial reports and internal controls are some of the reasons of the current financial situation. The committee noted the need for an immediate audit of books.
“Without a proper audit and accounting systems, fraudulent and nefarious activities can easily be perpetrated without any detection at all. For the airline to be competitive there is need for cost rationalisation and qualified personnel,” said the committee.
The committee also observed that Air Zimbabwe needs to come up with remedies to its high wage bill and to solve labour disputes over retrenchment packages.
“An analysis of the financial statements indicated that Air Zimbabwe didn’t have capacity to offer services that were required. There was need for the shareholder to decide whether Air Zimbabwe needed to be rescued by recapitalisation or be liquidated,” said the report