Troubled Zimbabwe’s sole airline, Air Zimbabwe, is completely broke and is being sued by its workers while facing a US$30 million (about P208 million) debt.
The airline has already cancelled scheduled regional and international flights due to shortage of funds to buy fuel and to pay more than a thousand of its workers.
Air Zimbabwe has long exhausted the good credit rating it inherited from Air Rhodesia in 1980 after the country’s independence.
It has, in the past decade, relied on government handouts, mostly from the controversial Reserve Bank of Zimbabwe governor Gideon Gono, to run its ageing fleet after the hostile macro-economic conditions hit hard on its coffers.
In a bid to cut costs the airline has indicated plans to lay off over 700 of its workers, with whom it currently is locked in a bitter labour dispute.
The workers are fiercely resisting involuntary leave ranging between three to 12 months.
The acrimonious dispute has spilled into the labour court, with court documents revealing the dire state of the airline.
“The honourable arbitrator is reminded of the dire financial state of the respondent (AirZim), which is no secret,” said Dube, Manikai and Hwacha, Air Zimbabwe‘s legal representatives in court documents.
“Its shareholder (government) is out of funds to finance its operations and capitalisation. It is on the verge of collapse. Ordering the restoration of the status quo (working without involuntary leave) would send the respondent (AirZim) almost immediately straight into real liquidation and the forced retrenchment of all employees on paltry packages, which may not exceed their present monthly incomes,” the lawyers said.
The documents show that Air Zimbabwe has a weak balance sheet with creditors in excess of US$28 million (about P194 million).
In February, new Finance Minister Tendai Biti from the MDC said the airline had been draining US$3 million (about P20.85 million) per week from the fiscus.
The government parastatal has resorted to borrowing to procure fuel and pay allowances.
“The company is actually insolvent,” an internal document presented by Air Zimbabwe’s chief economist and treasurer on April 22 2009 reads in part.
Cost-cutting measures, which started in January, are projected to save up to US$1 million per month, or US$12 million per year.
So far, the measures have saved US$500 000 per month.
This is still inadequate to meet the airline’s operating costs. Cashflow deficits have remained at unsustainably high levels of US$4, 5 million, US$2, 2 million, and US$3, 5 million in January, February and March 2009 respectively.