Cabinet to seal Air Zim’s fate

Source: Cabinet to seal Air Zim’s fate – DailyNews Live

John Kachembere      7 July 2017

HARARE – President Robert Mugabe’s Cabinet will weigh its options on how
Air Zimbabwe (Air Zim) could be untangled from its current mess, as it is
emerging that the airline is on the cusp of launching a new business
model.

The national flag carrier, which at independence in 1980 boasted a fleet
of 18 planes, has been operating a small antiquated fleet and this has
greatly compromised on quality and increased operating costs, rendering
the airline uncompetitive.

The carrier has operated a number of different aircraft types in recent
years, ranging from Embraer ERJ-145s via BAe 146s to the A320 and 737-200
short-haul models and larger wide-bodied 767-200ERs but is currently just
using ageing Boeing equipment, which are all more than 20 years old.

Air Zim is weighed down by a $30 million debt.

The Daily News can reveal that a number of options have been put on the
table by the ministry of Transport and Infrastructural Development, in
conjunction with Air Zim management, to get the troubled airline out of
the woods.

A proposal that seems to be gaining traction is that of creating a new
airline business, free from legacy issues dogging Air Zim, and finding a
win-win solution to dealing with the parastatal’s creditors so that they
will not harangue the new business. This might involve government assuming
Air Zim’s debt, and issuing Treasury Bills (TBs) to the approved
creditors.

There are, however, a lot of legal issues involved to get around these
issues, which are currently under consideration.

A TB is a short-term debt issued and backed by the full faith and credit
of government. These debt obligations are issued in varying maturities.

One of the options involves the possible liquidation of the airline to
pave way for the establishment of a new and privately-owned entity,
Zimbabwe Airways, but having seen how Philip Chiyangwa was forced to
abandon plans to form a new football mother body and shunt aside the
debt-ridden Zimbabwe Football Association, officials believe this route
would leave a sour taste in the mouth.

Liquidation is an event that usually occurs when a company is insolvent,
meaning it cannot pay its obligations as and when they come due. The
company’s operations are brought to an end, and its assets are divvied up
among creditors and shareholders, according to the priority of their
claims.

Sources at Air Zim said the final decision would be made by Cabinet.

This comes after A YouTube video of a Zimbabwe Airways branded Boeing 777
taking off in Malaysia emerged last month, sparking debate about the
future of AirZim.

Research conducted by the Daily News shows the new airline secured
ex-Malaysia Airlines B777-200 (ER) 9M-MRP (msn 28421), which conducted air
tests at Malaysia’s Sultan Abdul Aziz Shah Airport a fortnight ago.

People briefed on the matter said the plane – registered in Malaysia – was
part of a new partnership deal where Malaysia Airlines will initially
provide Zimbabwe Airways with four aeroplanes, which were retired last
year, with two of the Boeing 777s expected in the country any time soon.

“Air Zimbabwe is planning to resume its lucrative London route but has
been failing to do so due to lack of aeroplanes and also the fear of
having its planes attached, hence the decision to liquidate and come up
with an entirely new company,” the sources said.

Air Zim last operated the London route in 2012 when it was expelled from
the International Aviation Transport Association clearing house after
accumulating fee arrears. The debt currently stands at over $3,5 million.

Alongside its flights between London and Harare, which at their peak were
operated on a six times weekly basis, Air Zim also previously offered
flights from the United Kingdom to Victoria Falls on a charter basis for a
tour operator.

According to the sources, the new flag carrier would once again be open to
exploring such arrangements noting that this operation was what pre-empted
the latest infrastructure investment at Victoria Falls International
Airport.

“Management recently concluded a detailed analysis of its markets and
identified the capacity niches, which would best fit demand on its network
and drive revenue. With the new and right planes now in place, what is
only left is the legal framework to operationalise the new company,” the
sources added.

Aviation experts, however, said the liquidation of Air Zim – saddled with
a $30 million debt – may not be a stroll in the park.

“Creditors may conjure up the precedent of an embarrassing episode in
which the Zifa attempted to cunningly dribble past their creditors by
dissolving the association to recover their money from Air Zim,” the
experts said.

Air Zim management professed ignorance of the new company and the
impending liquidation.

“We have nothing to do with the new company, Zimbabwe Airways, and as of
now we are still operating as Air Zimbabwe. If there are any changes in
the future we will let you know,” Air Zim public relations executive,
Hazel Zisanhi, told the Daily News.

Transport minister Joram Gumbo also dismissed the national flag carriers’
liquidation as mere speculation.

“My position, which has been approved by Cabinet, is that I am looking for
investors to partner Air Zimbabwe and that has not changed,” he told the
Daily News.

“As for Zimbabwe Airways, I cannot comment on that as it’s a private
company and we cannot stop people from registering companies with names of
their choice,” he said, adding that he will make an announcement should
there be any developments at AirZim.