REPORT OF THE PORTFOLIO COMMITTEE ON TRANSPORT AND INFRASTRUCTURAL DEVELOPMENT ON THE OPERATIONS OF AIR ZIMBABWE
THE MINISTER OF TRANSPORT AND INFRASTRUCTURAL DEVELOPMENT (HON. DR. GUMBO): I would like to take this opportunity to respond to issues raised in the report by the Parliamentary Committee on Transport and Infrastructural Development resulting from an inquiry on the operations of Air Zimbabwe.
1.0 The Committee undertook this inquiry following operational challenges being faced by the National Airline in an attempt to proffer possible solutions.
2.0 The Ministry notes the observations made by the Committee and responds as follows:-
2.1 Air Zimbabwe’s Viability
Air Zimbabwe is currently operating at a loss but there is potential to turn around its fortunes. It is critical to note that the aviation industry faces high operational costs and low margins. This scenario calls upon shareholders to continuously inject new capital into the business for sustenance and viability. Air Zimbabwe thus has potential if the shareholder recapitalises the Airline. The aviation industry supports tourism and international business by providing the world’s only rapid worldwide transport network. The aviation industry is of strategic importance to national development through facilitating trade, tourism and regional integration.
A cross sectional analysis of the aviation industry has shown that most national airlines are not making profits and those that do so have thin profit margins, which do not match the underlying heavy capital investment. However, it must be noted that most of the benefits of the aviation industry are in downstream industries. It is worth noting that it is national airlines that have potential to continue to withhold these benefits. As such, it is apparent that the aviation industry be viewed as a strategic sector and enabler of the economy; hence there is need for decisive State intervention on the national airline, Air Zimbabwe.
Air Zimbabwe’s debt stands at $323 million as at 31st December 2016. Of encouragement is the fact that the debt is now increasing at a decreasing rate, hence there is light, going into the future. Like any other national airline, Air Zimbabwe requires capital injection from Government.
The global trends on the continued existence of legacy airlines or national airlines shows that; governments continue to bail them out as they are considered to be strategic assets of national importance. The following examples show how some governments have bailed out their national airlines to ensure their continued existence.
2.1.1 Ethiopian Airlines.
Whilst Ethiopian Airlines has declared profits over the past decade, the airline has benefited from State policies to keep operating costs down. Ethiopian Airlines benefits from being able to borrow at very favourable rates due to its strategic national role. The Ethiopian Government has adopted deliberate policies aimed at keeping down labour and financing costs. The airline is also exempted from paying income tax by the Government.
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