Air Namibia looks ahead
The national carrier's focus for this year is the finalisation of its Integrated Strategic Business Plan.
13 January 2020 | Transport
According to the company's interim CEO Xavier Masule, the key focus for January and February is the finalising the ISBP, which will be the blueprint to achieve the desired financial objectives.
Masule said the envisaged ISBP will contain business model and organisational structural changes, with strategic initiatives aimed at revenue enhancement, strategic cost containment, efficiency improvements, customer service excellence, human capital development and productivity improvement.
According to Masule, 2019 was by far the most difficult year in the history of the airline, due to internal and external pressures.
“We are happy to have survived the challenges and we believe that 2019's experiences will go a long way as key inputs for turning around the financial fortunes of Air Namibia.”
He said some of the factors that threatened Air Namibia's operations last year were the airline's projections that it will have a cash flow deficit of N$1.6 billion by the end of March 2020, inclusive of the accumulated cash flow deficit brought forward from previous years as well as the full amount claimed by Challenge Air.
Masule further said Air Namibia's key source markets for passengers and cargo traffic (Namibia, South Africa and Angola) continued to experience negative growth, with some of these countries being in depression while others are in recession, impacting revenue-generation negatively.
“Competition from large well-resourced network carriers continued to intensify, inclusive of Lufthansa's re-entry into the Namibian market, while KLM, Ethiopian and Qatar Airlines increased their foothold in the Namibian market. Air Namibia further welcomed the entry of a competitor in the domestic market in the name of Westair,” according to Masule.
He added that Air Namibia's attitude towards competition is that it is unavoidable and “imposes pressure on our business to become more efficient and strive for excellence to remain relevant and to succeed”.
Masule said to ensure the continuation of the airline's undented safety record, as well as continuous compliance to applicable regulations, the entire fleet underwent mandatory 'heavy maintenance' checks over a 18-month period ending November 2019.
“These heavy scheduled maintenance activities required significant cash outlays costing hundreds of millions of Namibian dollars, resulting in some of the aircraft remaining grounded for extended periods of time while funding solutions were being pursued. The impact thereof was the airline operating well below its normal revenue-earning capacity and the published schedule was disrupted.”
Masule said the Challenge Air court case, which started in 1998 and related to a dispute on an old aircraft lease agreement, also resulted in significant amounts of the airline's cash earnings being seized through court orders in Germany.
“Given the negative publicity covered in both the local and international media houses around Air Namibia's risk of closure, some suppliers changed their trading terms by terminating the supply arrangements, demanding upfront payments or demanding security deposits for goods and services required for the airline's operations. This put further pressure on the airline's ability to trade as a normal going concern,” said Masule.
According to him, cash flow shortages resulted in the delayed payment of some employee benefits and payroll deductions to service providers, such as medical aid, retirement funds and home loans.
Masule added that in response to these challenges, aimed at ensuring business continuity, some measures were implemented, which all contributed to the airline continuing to trade, albeit under difficult conditions.