Airzim debt keeps investors at bay

Zimbabwe and some reputable airlines but none of them has seen the light of day.
It is natural that most investors are scared to put their money in businesses that are indebted, as is the case with the national airline.

Last year, Transport, Communication and Infrastructure Development Minister Nicholas Goche admitted that Airzim could only be privatised if it is recapitalised first because its debt did not attract investors.
“Air Zimbabwe currently has a debt overhang . . . It is very difficult to attract reputable investors when your balance sheet is in such a state.

“Air Zimbabwe needs to be recapitalised first and then gradual steps can then realistically be taken to shed off some equity by Government for uptake by private investors,” Minister Goche said then.
Thus, the move taken by the Government, which holds a 100 percent stake in Air Zimbabwe, to take over its debt is a noble one.

The Draft Assumption Bill that the Government is drafting will see the State assuming the Airzim debt.
This will make the State enterprise attractive in the face of much needed foreign partners.
Legislation to provide for the takeover of the huge debt is laudable in that it demonstrates Government’s commitment to see a successful turnaround of the beleaguered national airline.

It also instills confidence in whoever the company will approach or will express interest in investing in the company as legal provision for takeover of the debt would absolve the firm of old debt obligations.
No investor would want to be associated with a debt- burdened and loss-making company struggling for survival.
Investing in such a firm would mean assuming the responsibility to clear previous debts and then providing requisite funding to revive the business.

Even after the debt takeover, Air Zimbabwe will still need huge financial resources to fund recapitalisation, which includes buying or leasing new aircraft.
The national airline, previously known for excellence in service provision, was forced to suspend flights in January due to protracted labour disputes.
Its planes were impounded in London and South Africa over debts. There we also attempt to place the company under liquidation.

Air Zimbabwe has been losing millions in potential revenue to competing airlines.
These include South African Airways, British Airways, Zambezi Airlines, Ethiopian Airways and Kenyan Airways, which are plying most of the routes that were previously serviced by Air Zimbabwe.

Apart from debts, the airline is also dogged by high operational costs emanating from the inefficiency of its aircraft and a bloated workforce.
An aviation expert said yesterday relieving the airline of its heavy debt obligations would open new avenues of opportunities through partnerships, credit and allow it to start on a new slate thus enable it to concentrate on issues that will turn around it to profitability.

“Probably the reason why most investors were so scared in partnering Air Zimbabwe was the debt,” said the expert with 10 years working experience with Air Zimbabwe. “It is the right thing to do.”
State Enterprise Regulatory Authority executive director Mr Edgar Nyoni said taking over debt by the Government would lay the foundation of the restructuring of Air Zimbabwe.

Airzim is among 10 companies earmarked by Government for restructuring.