It’s crunch time for loss making Air Namibia with the government due to make a decision on the fate of the carrier in the coming days, following stunning revelations it cannot adequately fund its turnaround nor find any investors.
Namibia’s Minister of Finance and Chairperson of the Cabinet Committee on Treasury, Ipumbu Shiimi, in a statement said implementing a turnaround plan for the cash-stricken national carrier would cost taxpayers more than $461.6 million, after already spending $554 million over the last decade to bail out the airline.
“AirNamibia has been a loss-making entity since its inception and currentlyrequires substantial amounts of money to bail it out from its currentintractable debt situation. It is further worth noting that currently, AirNamibia has significant debts that are unsustainable,” he said.
Namibiais currently battling economic fallouts from the COVID-19 pandemic that Shiimisays have impacted the government’s ability to finance the turnaround. Theairline has also failed to attract a strategic partner or investment.
“In2019, the government had approached all airlines currently operating in Namibiaas well as those that intend to operate in Namibia to assess if there would beany appetite to attract a strategic partner or investment for Air Namibia.Regrettably, all of the airlines that were approached declined.”
AirNamibia’s financial woes are also a consequence of lawsuits such as the $24.2million out of court settlement reached on January 29 between the carrier andthe liquidators of defunct Belgian operator, Challengair, which had filed forAir Namibia’s liquidation in the Windhoek High Court to retrieve outstandingfunds relating to a longstanding dispute over the lease and maintenance ofaircraft in 1998.
“Asa shareholder, the government will study the settlement agreement betweenChallengair and Air Namibia. In the coming days, we will communicatetransparently with all stakeholders in the best interest of the Namibiantaxpayers and citizens,” Shiimi said.
Itappears the government was blindsided by the deal. Public Enterprises MinisterLeon Jooste indicated the government had had no prior knowledge of thearrangement. “We were not consulted on the details but I made it clearthat whatever they discuss or agree to should in no way bind or implicate theshareholder (government),” he was quoted by local newspaper, Namibia Sun.
An analysis carriedout by the government on Air Namibia’s failings discovered that the airline wasoperating with a flawed business model, where out of the 19 routes it wasoperating in 2019, 15 were loss-making due to high structural and operatingcosts.
Shiima said a newbusiness plan was then drafted with an implementation cost of more than $461.6million. Due to the effects of COVID-19, the amount is expected to besignificantly higher.
Shiimiunderlined that the government’s decision not to oppose the court case was “inthe best interest of staff and future generation of Namibians”. The governmentwould work closely with the staff and labor unions to safeguard theirinterests.
“High-levelconsultations with all relevant stakeholders are ongoing and the nation will beupdated going forward.”
