Air Zimbabwe Skirts Sanctions Narrowly Flying By

Zimbabwe, a once financially stable nation, has faced increasing financial hardships over the past decade. The southern African nation’s financial situation has largely been caused by the politics and corruption of President Robert Mugabe government and the resulting sanctions imposed on Zimbabwe by the United States and the European Union as a result of President Mugabe’s political actions.

 

Zimbabwe’s national airline, Air Zimbabwe, has been caught in the middle of the nation’s political sanctions causing the carrier to reduce its network from 28 destinations just a few years ago to just 9 official destinations and actually serving seven of those destinations.

 

With the airlines’ fleet having dwindled to just five aircraft, ranging in age from a nearly 27-year-old Boeing 737-200 to a ‘youthful’ nearly 21-year-old Boeing 767-200, the airline has continually faced issues in maintaining its aircraft and providing a reliable schedule of service. Now, following a labour dispute that resulted in a month long pilots strike, as the pilots demanded their outstanding salaries and wages of US3,800,000 be paid, and the airline coping with a US$108,000,000 debt, Air Zimbabwe is fighting to keep both of its Boeing 767-200s operational and acquire new aircraft to expand its network.

 

As a result of Air Zimbabwe’s financial mismanagement, the airline narrowly escaped having Lufthansa Technic auction off one of its Boeing 767-200 engines, due to an overdue US$2.5 million debt for the repair of the engine. To prevent the engine from being auctioned off, the airline must immediately begin monthly payments of US$500,000 or “Failure to honour this agreement will result in Lufthansa Technic auctioning the engine without further notice.” Presently, the agreement to pay US$500,000 per month is more than the airline can afford to pay as the company slips further into financial disrepair.

 

While Air Zimbabwe continues on a downward financial spiral, the company has managed to pull off an interesting deal to acquire two used Airbus A340-500s, which the airline expects to enter the fleet in June. Given that Air Zimbabwe is prevented from acquiring the Airbus A340-500s directly, due to financial and political scansions imposed by the United States and European Union, the airline has sought out a Chinese energy company to broker the deal.  With a Chinese business acting as the middleman for the A340-500 acquisitions Air Zimbabwe is able effectively skit the sanctions.

 

The two A340-500s pose some challenges for the cash strapped and financially unstable airline. From a financial standpoint, the A340-500 is a gas-guzzler of an aircraft that offers more range and capacity than the airline needs to service its London and Beijing routes.  Operationally the Airbus A340-500 offers no fleet commonality with the airline’s present all Boeing fleet … and if the airline is unable to pay a US$2.5mil repair bill for one of its Boeing 767-200s, how is it paying an estimated US70,000,000 A340-500??

 

How long Air Zimbabwe continues to fly remains to be seen. Zimbabwe’s government plans to sell off the airline as a private entity, but with the company in a massive financial downturn, an aging fleet, maintaining 50 pilots for five aircraft, 280 maintenance personal to service the five aircraft and a business infrastructure that is intertwined with a corrupt government, finding a buyer might be difficult.

 

Happy Flying!

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Comments

  1. I’m sure they are not paying cash for the 340s. There must be financing, either arranged by, or provided by, the motivated Chinese firm.

  2. Yeah, the gentleman has found friends in the east. I’m guessing the spares would also be going through the middle man. I think financing could be arranged with deals on platinum, which Zimbabwe has quite a bit of. Maybe diamonds. (As you know, China is conscious of its environmental impact, and platinum goes well in the catalytic converters in the exhaust systems of automobiles.)

    Isn’t buying an A340-500 the same as buying flights to nowhere? IMHO, that plane would be great for Grace, nice non-stop flights for weekend grocery shopping in Malaysia, but please don’t tell anyone I said so.

  3. I have no doubt that Zimbabwe’s government has entered into a finance deal with the Chinese firm for payments derived from not liquid assets, such as diamonds of platinum. The government and airline are tapped and there is a very limited opportunity for foreign entities to invest in Zimbabwe.

    I am curious to see if the planes are actually delivered.

    Happy Flying!

    -Fish

  4. 50 pilots for 10 aircraft actually makes some sense…if Air Zimbabwe was operating a completely full schedule.

  5. AA,

    50 pilots for 10 aircraft might make sense, but the airline operates five aircraft, one of which is out of service … and the schedule is far from a full schedule.

    Happy Flying!

    -Fish

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