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Report of the Portfolio Committee on Transport and Infrastructural Development on Air Zimbabwe and The Civil Aviation Authority of Zimbabwe
Parliament of Zimbabwe
November 16, 2010

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Introduction

The Portfolio Committee on Transport and Infrastructural Development conducted an inquiry into the operations of Air Zimbabwe Holdings and the Civil Aviation Authority of Zimbabwe (CAAZ) as part of its oversight function.

Committee’s Objectives

The Committee sought to establish the following:

  • Operational challenges faced by Air Zimbabwe and CAAZ;
  • The issue of restructuring/retrenchment at Air Zimbabwe;
  • Why the Airline had terminated some of its routes; and
  • The state and security of the airports throughout the country.

Methodology

The Committee received oral and written evidence from workers, management and Board of Directors of Air Zimbabwe, CAAZ and Ministry of Transport and Infrastructural Development Officials. The Committee also conducted a fact-finding visit to Harare Airport. It was shown around Air Zimbabwe premises, toured the airport and the scene of the accident and the aircraft that was involved in the accident with warthogs.

COMMITTEE’S FINDINGS

Air Zimbabwe Holdings

The Committee established that Air Zimbabwe Holdings was currently facing operational challenges arising from a number of reasons ranging from high operating costs, low load factors, debt overhang, overstaffing, and lack of ‘clear-cut separation of powers’ between management, board and Ministry. This was attributed to gross under capitalization, past regulatory environment, un-timely implementation of turn-around strategies, sanctions, and unsettled labour disputes. The Committee established that other than the purchase of the 737s in 1986 and 1987 and subsequent purchase of the 767s in 1989 and 1990, there has been no capital injection into the airline.

It was submitted that the Airline was not at liberty to charge economic fares. During the price control and Zimbabwean dollar era, the Airline was said to have made a huge loss. Following a Cabinet decision that the airline could not be allowed to charge in foreign currency, a fare for a trip from Harare to London charged in Zimbabwe dollar translated to about US$25.00 but the actual cost in the region was $800.00. This contributed a lot to the accumulation of the debt since the shareholder did not allow Air Zimbabwe to operate economically. The shareholder chose for the Airline to collect in Zimbabwean dollar which the airline could not use because its services were paid for in foreign currency.

Both management and staff emphasized the need to have new aircrafts. The Airline’s current fleet is aged and has become costly to maintain. Maintenance costs were said to be too high and the major cost drivers include Jet A1 fuel, aircraft maintenance, navigation fees, handling fees, crew allowances and aviation insurance. The Committee was informed that fuel consumption and maintenance represent 40% of the airline’s total cost. It was submitted that as long as the airline continues to operate the aged aircrafts, it would have 40% expenditure which the airline cannot afford.

Emphasis was put on the cost of fuel (Jet A1) which both management and staff said remains the highest cost driver in Aviation. Zimbabwean Jet A1 is one of the most expensive fuel in the region. This makes it difficult for Air Zimbabwe to compete with other airlines.

The Committee was informed that the Airline’s liabilities to suppliers was increasing on a daily basis and stood at $64 million as at 25 October 2010. The debt is not a result of borrowings but arose from nonpayment to service providers. It was stressed to the Committee that the airline was basically operating on an overdraft facility. The Committee established that prior to February 2009, Air Zimbabwe’s cost and revenue structure was such that while its expenditure was 70% in foreign currency, its foreign currency earnings were only 10%. Both management, board and staff expressed the need for injection of working capital because of that mismatch on the structure.

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