Run down by poor management and government interference, the airline now finds itself insolvent, and failing to attract investment.
The national airline, Air Zimbabwe (AirZim), is insolvent. It has failed to attract investors, despite courting several suitors to rescue the company from a financial crisis, according to sources at the airline and in the ministry of transport.
The sources said the government had approached several potential investors, particularly among its perceived allies in Asia.
"They started canvassing for new investors in June last year. There has been no interest in the airline," a source at the airline said.
The airline's board was fired last week and an insurance scandal involving alleged fraudulent insurance payments by management led to the arrest of two executives and a former chief executive.
The board had failed to convince potential investors that the struggling company could be turned around under the current circumstances, a senior official in the transport ministry said.
"The only investor that showed a bit of interest was British tycoon [Nicholas] van Hoogstraten. But he set terms the government could not agree on."
Reports last year said Van Hoogstraten had offered AirZim a multimillion-dollar package as part of the airline's investment plans, which included buying two new Boeing 777 planes.
But Van Hoogstraten, who counts President Robert Mugabe among his friends, wanted management and financial control of AirZim in a new company that would be registered and operated from the United Kingdom, a suggestion Transport Minister Obert Mpofu is said to have found "too weird to be acceptable" because of the government's stand-off with the British.
Mugabe considers the British government his biggest adversary and blames it for spearheading international sanctions that targeted his regime.
Van Hoogstraten's terms appear to indicate that he wanted to shield any new investment from the AirZim balance sheet, which company sources said showed the company was insolvent.
The British businessperson has previously lent large amounts of money to AirZim. The board last year put in place an investors' prospectus to woo financiers.
The Mail & Guardian has a copy of it. It highlights the extent of the crisis at the airline, which has been run down by a combination of poor management and government interference in operations.
Investors invited to acquire shares
The prospectus sates that there are already "targeted prospective investors who are being invited to acquire shares in the ordinary share capital of AirZim and invest in corporate bonds being issued by AirZim". But it did not name them.
According to an analysis of the financial performance of AirZim given to potential investors, revenue for the company plunged from $56 492 591 in 2010, the second year of Zimbabwe's dollarisation, to $9 873 205 in 2012.
This was against expenditure of $89 998 448 and $53 695 795 in 2010 and 2012 respectively, resulting in massive funding gaps.
Revenue for the two months to February 2013 amounted to $903 448, against expenditure of $5.2-million — another massive deficit.
Liabilities as of February 28 2013 amounted to $194.3-million, surpassing current assets, amounting to $25.3-million, the information package for investors showed. This means its liabilities surpassed assets by $168.9-million.
This, in financial terms, means AirZim is technically insolvent and no longer a going concern. The situation has apparently deteriorated with two Airbus planes that AirZim leased in 2012 currently grounded in South Africa because the airline has no money to service them.
Donation to the much-feared CIO
Former transport minister Nicholas Goche brokered a deal for the two planes from a Chinese businessperson, Sam Pa, who donated $100-million to the much-feared Central Intelligence Organisation (CIO).
Goche worked with CIO director Happison Bonyongwe in structuring the deal with Pa without the knowledge of the AirZim board, which was then chaired by businessperson Jonathan Kadzura.
According to the investors' prospectus, the government, AirZim's 100% shareholder, has been "making most of the policy and operational decisions of the airline, significantly reducing management's role in the strategic direction of the company".
This has often frustrated both the management and the board, resulting in a high turnover of executives and instability in the board.
Over the past 10 years, the airline has had five different boards and five different chief executives.
The prospectus states that the identified potential investors have until June 30 2014 "to undertake their own due diligence reviews, inspections and valuations" of the airline's business, and they are expected to have signed a memorandum of agreement for shareholding by that date.
$200-million needed to cover debt
The prospectus says AirZim requires at least $200-million to cover debt and pay outstanding salaries. Its domestic creditors include the Zimbabwe Revenue Authority, the government's tax collection agency, the Civil Aviation Authority of Zimbabwe and the AirZim Pension Fund.
The intention was to raise nearly $350-million: $300-million was to be raised from new investors and $50-million was to be borrowed locally.
Mpofu did not answer calls to explain whether the government had any new plans for the airline, given the suspension of the board and the arrest of top managers for fraud.
They are the acting managing director for AirZim, Grace Pfumbidzayi, its chief executive Innocent Mavhunga and its former chief executive Peter Chikumba.
Former finance minister Tendai Biti, the secretary general of the Movement for Democratic Change led by Morgan Tsvangirai, said in 2011 that the only feasible thing to do was to shut down AirZim, given the rot at the parastatal.
"Air Zimbabwe Private Limited as it is defined right now should be closed immediately," Biti said after declining requests for fiscal support to the airline.