Air Namibia rescue plan

Liquidation is one option

13 June 2019 | Transport

The Cabinet Committee on Public Enterprises is to appoint a consultancy with a “very specific terms of reference” to come up with a business model that will ensure the embattled Air Namibia can break even within three years.

The minister of public enterprises, Leon Jooste, on Tuesday acknowledged that the airline's current business model would not allow it to become commercially viable.

The consultancy is made up of a group of international aviation experts who have already identified an “optimal” business model.

Jooste said the model provides a more accurate picture of the various realities of Air Namibia and what may be required to make it commercially viable.

Once this business model is approved, the consultancy has to design and integrate a strategic business plan.

The Cabinet Committee on Overall Policy and Priorities (CCOPP) discussed the way forward for Air Namibia last Wednesday.

“We looked at a realistic snapshot of Air Namibia in its current form, its debt levels, and the cost of transforming it into a feasible one we would all like to see,” Jooste said.

“All options were costed. The options discussed are whether Air Namibia is to continue as is, and how it will be with a new business model. Air Namibia staff offered ideas on how they think certain inefficiencies can be addressed. A last option, and it is not the only one, is the potential liquidation of the airline.”

Asked whether a country with such a small population should insist on having its own airline, Jooste said: “Air Namibia in a different form will be an asset to the country. We are very keen on the domestic services they have been providing. International and regional routes are being serviced by competitors already, as we know. Those are not big strategic items for us but the contribution they make domestically is extremely valuable.”

Air Namibia has been a heavy financial burden on the taxpayer, as it has never made a profit since its establishment in the early 1990s.

Its operations have had to be scaled down in the past few weeks because of liquidity problems, which Jooste blamed on a “bureaucratic hiccup” in paying its suppliers. Notwithstanding, the minister said these operational problems were of great concern because Air Namibia was losing revenue from three of its four leased Airbus A319 planes.

“It causes a big gap in the revenue stream and apart from losing the revenue, Air Namibia has to carry the cost of accommodating passengers on other airlines,” Jooste said.



Financial woes

According to reliable sources, Air Namibia has suffered losses of between N$4.5 and N$5 billion since 1998. The sources claim that the airline is currently making a loss of between N$600 and N$700 million per year, and that it has to pay between N$50 and N$60 million per month to lease the four Airbuses.

However, Air Namibia spokesperson Paul Nakawa maintains that Air Namibia's financial losses “are far less than its contribution to the economy”.

Jooste acknowledged at this week's media briefing that the two large Airbuses operating the Frankfurt route are the Achilles heel of the airline at the moment.

Air Namibia signed a 12-year lease agreement for the Airbuses six years ago. The agreement contains no exit clause, and because of exchange-rate fluctuations the rent has escalated in Namibian dollar terms.

“We need to find alternative routes for these two aircraft. But even from the route feasibility studies, it does not look too rosy for us,” Jooste said.

CATHERINE SASMAN