US$407m losses: Air Zimbabwe ‘dead as a dodo’ 

Source: US$407m losses: Air Zimbabwe ‘dead as a dodo’ – The Standard

Air Zimbabwe has US$39 million in contingent liabilities arising from claims by South Jet

TECHNICALLY-INSOLVENT Air Zimbabwe has accumulated losses of US$407,84 million, while total liabilities have exceeded assets by US$380,22 million, further casting significant doubt on the airline’s ability to continue as a going concern, a latest report has shown.

According to the audit report on State-owned enterprises and parastatals for the financial year ended December 31, 2022 (2019 for Air Zimbabwe), the airline continues to bleed with no solution in sight.

At the heart of the airline’s problems, according to acting auditor general Rheah Kujinga, is a US$39 million in contingent liabilities arising from claims being done by South Jet (China) in connection with a dispute over ownership of ZWPN Airbus A320.

In 2019, Air Zimbabwe found itself in a tug of war with the Isle of Man Company South Jet over two Airbus planes A320s which remain parked up as the airline claims they are not suitable for use.

The two Airbus planes arrived in Zimbabwe in 2012.

While the leasing company, South Jet, says Air Zimbabwe needs to pay for the planes, the carrier maintains that they were a donation and that the Chinese entity needs to release the paperwork to allow them to repair the planes.

“I draw your attention to the fact that Air Zimbabwe incurred a loss of US$15 388 869 (2018: US$84 898 659). The accumulated losses of US$407 843 950 have been recognised to date and that the company’s total liabilities exceed its assets by US$380 224 835,” the report reads in part.

“Additionally, there is a contingent liability amounting to approximately US$39 000 000 arising from claims by South Jet (China) in connection with a dispute over ownership of ZWPN Airbus A320.

“These conditions create uncertainties which cast significant doubt on the company’s ability to continue as a going concern. My opinion is not modified in respect of this matter.”

Further, Kujinga noted during the period under review, aircraft amounting to US$30,9 million at cost was recognised in the financial statements.

She said impairment testing has not been carried out on recognised aircraft despite there being indications of impairment.

“Consequently, I was unable to satisfy myself that the aircraft has been recognised at values that do not exceed their recoverable amounts,” she said.

Kujinga noted that since January 19, 2014 when the Z-WPM A320 aircraft was grounded in South Africa, a debt pertaining to parking fees was not being accrued.

Servicing of the debt was also not being done on the reasons that invoices were not being received from South African Airways Technical while parking fees debt in relation to the Z-WPM A320 aircraft have been omitted from the financial statements.

Kujinga said as at the beginning of the year ended December 31, 2019, Air Zimbabwe’s opening balances were not agreeing to the prior year financial statement balances.

However, she said management could not provide a justification or correction for the variances in the opening balances amounting to US$92,5 million.

“As such, I could not satisfy myself on the accuracy of the opening balances and determine if any adjustments were necessary to the statement of financial position. Therefore, for all balance sheet balances, valuation and accuracy of them could not be determined,” she said.

Air Zimbabwe is also caught in a tax evasion whereby the auditor noted that during the year, the carrier did not do any tax computation for both income tax and deferred tax.

She said quarterly returns were not done for income tax. Therefore, she could not ascertain whether a tax liability was supposed to be recognised or tax losses.

Included in the cost of sales for the period under review were expenses amounting to US$1,8 million which did not have supporting documents.

Air Zimbabwe was placed under reconstruction in terms of the State-Indebted Insolvent Companies Act in 2018, for being technically insolvent and is encumbered with a US$341 million debt.

The scheme of reconstruction was concluded in June 2021.