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Air Zimbabwe heading for crash-landing

Confidential papers seen by Standardbusiness show that the engine of a B767 could be auctioned if the airline fails to pay a monthly installment of US$500 000 beginning next month to Lufthansa Technics, to offset a US$2,5 million debt.

Lufthansa Technics is one of the few companies in the world which can do engine overhaul and maintenance on B767 planes.

“The airline (Air Zimbabwe) managed to stop Lufthansa Technic from auctioning the B767-200 engine which requires US$2,5 million for repairs, on condition that we sign an agreement whereby we shall make US$500 000 monthly payments from May 2011 to redeem the debt,” the documents said.

“Failure to honour this agreement will result in Lufthansa Technic auctioning the engine without further notice.”

Experts say US$500 000 monthly installment is too much for an airline which is failing to generate enough revenue due to a poor business model.
In addition, analysts say, the airline’s equipment is antiquated and this means the cost of running an airline is high as compared to regional counterparts.
On insurance, the airline is behind on quarterly payments.

It is supposed to pay  (Euro) 1 036 092,88 (about US$1,5 million) for the quarter ending June 30 2011.

The money was due on April 1.

In addition, the airline owes South African creditors US$1 million and the reprieve ended yesterday.

It was not clear whether the airline had paid the creditors and the insurance cover as the acting group chief executive officer, Innocent Mavhunga was said to be in a meeting when this paper called on Friday.

Jonathan Kadzura, the airline’s board chair was unavailable for comment as he was in a meeting.

According to confidential documents seen by Standardbusiness, Air-Zim paid Zambezi Air-lines US$40 000 towards aircraft hire in the week ending April 13. It paid US$20 000 the following week for aircraft hire.

The documents paint a gloomy picture of the airline as they showed that its debt was US$94,40 million at the end of the week ending April 20.

“Air Zimbabwe Passenger has a creditor’s balance of US$91,39 million, NHS US$2,53 million and Galileo US$470 575,” the documents said.

Pilots at AirZim went on strike on March 22 demanding their outstanding salaries. They resumed work on April 22 after the Ministry of Transport bailed out the airline by providing US$3,8 million.

The money was allocated to salaries (US$2 million); US$101 190 towards hand-ling charges; US$74 286 for Jet A1 fuel; US$57 143 for navigation fees and US$20 000 towards aircraft hire.

As a result of the strike, the airline could have lost over US$20 million in potential revenue since it was making an average loss of US$5 million a week.

The airline usually flies at least 4 000 passengers per week. As a result of the strike, the airline ended up flying 820 passengers affecting the revenue of the company.

This means a big financial hole was left in the airline’s coffers which, according to aviation experts, will be there for a long time.

Air Zimbabwe has over the years deteriorated into a museum of mismanagement attributed to government interference.

According to sources, the airline’s board has become redundant as it is being bypassed by the Ministry of Transport in making crucial decisions.
Analysts say government has to move out of the airline to stop the financial   hemorrhage.

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