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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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