Zimbabwe’s aviation agency has plunged into insolvency after struggling to retire a $240 million debt while spending $5.6 million, over half of its monthly income on expenses, an official told Parliament yesterday.
Civil Aviation Authority of Zimbabwe (CAAZ) director, Joel Masuku told the parliamentary portfolio committee on transport and infrastructure development that the company was technically insolvent as its liabilities exceeded assets.
“We are technically insolvent. We are a going concern, still doing business and operating on a cash basis,” he said.
“Litigation would lead us to insolvency.”
Masuku said legacy loans accounted for $180 million while government loans were worth $60 million.
“You are looking at a debt overhang of almost $240 million for a company that now needs to be recapitalized,” he said.
CAAZ general manager, David Chaota admitted that the company was facing financial challenges compounded by legacy debt from the 80s and was failing to access offshore funds due to an unhealthy balance sheet.
“The loans have not been repaid and were transferred to the books of the authority in 2003,” he said.
He said the company was now operating on a cash basis.
“We eat what we kill, that is how we are surviving,” he said.
Masuku said from the eight airports the company owns, five were loss making domestic airports contributing one percent to the company’s revenue. The other three, Harare, Victoria Falls and Joshua Nkomo contributed 75 percent, 16 percent and 6 percent respectively.
He said the company was operating at 22 percent of capacity with group monthly revenue of between $2.6 million and $2.7 million versus expenditure of $5.6 million per month.
Depreciation accounted for $2.4 million.
“We are not breaking even, we are just getting along,” he said.
He said salaries accounted for between 46 percent and 56 percent of the revenue but varied from month to month due to holidays and overtime.
Masuku said the only way the company could return to profitability was through improving its capacity utilization.
“If we improve capacity utilization to 50 percent, we should be able to break even taking into account depreciation,” he said.
Prior to 1999, Masuku said the company’s passenger throughput was at 2.3 million but had declined by half to between 900 000 to 1.3 million.
The bulk of the company’s revenue, he said came from passengers accounting for 52 percent of the revenue.
“Once we achieve the 50 percent, we can start operating normally, which is possible,” he said.
He said there was need for CAAZ to work with the Zimbabwe Tourism Authority, and the tourism ministry to look at ways of repositioning the country as a major tourist destination.
“The turnaround strategy should focus on bringing in more passengers, airlines and sweat the terminal building to increase revenue,” he said.
Chaota said the company was struggling to finalise the rehabilitation of the Harare International Airport and the Joshua Nkomo Airport in Bulawayo while Victoria Falls funded from a $150 million loan from China Exim bank was near completion.
At least $15 million is required to complete work at the Joshua Nkomo Airport whose upgrade is worth $32 million while $11 million is required for Harare airport which is being funded by government.
At least 850 metres of the 5km runway was completed in the first phase while another 725 meters was completed in the second one.
“The main reason why the project was stopped is funding. It’s a high risk project and poses some safety risks in the operation of aircrafts at the Harare International Airport,” he said.
Chaota said so far the company had secured a loan from FBC Bank worth $2 million which would be released in the next three months.-The Source