The future of loss-making Air Namibia (SW, Windhoek Int'l) continues to hang in the balance with the Namibian government due to make a decision on the fate of the carrier in the coming days after revealing 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 flag carrier would cost taxpayers significantly more than NAD7 billion Namibian dollars (USD461.6 million), after already spending NAD8.4 billion (USD554 million) in the past 10 years to bail out the airline.

“Air Namibia has been a loss-making entity since its inception and currently requires substantial amounts of money to bail it out from its current intractable debt situation. It is further worth noting that currently, Air Namibia has significant debts that are unsustainable,” he said.

Shiimi said the COVID-19 pandemic had impacted his government’s ability to make available adequate funding for the turnaround. The government also had been unable to attract a strategic partner or investment in Air Namibia. “In 2019, the government had approached all airlines currently operating in Namibia as well as those that intend to operate in Namibia to assess if there would be any appetite to attract a strategic partner or investment for Air Namibia. Regrettably, all of the airlines that were approached declined.”

He said the government had taken note of a EUR9.9 million (USD12 million) out of court settlement reached on January 29 between Air Namibia and the liquidators of defunct Belgian operator Challengair, which had filed for Air Namibia’s liquidation in the Windhoek High Court to retrieve outstanding funds relating to a longstanding dispute over the lease and maintenance of a B767-300(ER) in 1998. In terms of the settlement, Air Namibia has agreed to pay the first instalment of EUR5 million (USD6 million) before February 19, 2021, followed by monthly instalments of EUR677,175.50 (USD819,914.61) until January 2022. “As a shareholder, the government will study the settlement agreement between Challengair and Air Namibia. In the coming days, we will communicate transparently with all stakeholders in the best interest of the Namibian taxpayers and citizens,” Shiimi said.

It appears the government was blindsided by the deal. Public Enterprises Minister Leon Jooste told the Namibian Sun the government had had no prior knowledge of the arrangement. "We were not consulted on the details but I made it clear that whatever they discuss or agree to should in no way bind or implicate the shareholder (government)," he said.

Shiimi said the government over the past few months had analysed Air Namibia to understand the core reasons for its commercial failures. “The analysis revealed that the airline was operating with a flawed business model where out of the 19 routes the airline was operating in 2019, 15 were loss-making due to high structural and operating costs. The highest loss-making route was the Frankfurt Int'l route, where major losses were incurred due to high fixed costs and under-utilisation (of aircraft). It also became clear that the combination of the types of aircraft, routes, high employee numbers, and other structural inefficiencies contributed to the financial distress of the company.”

Shiima said a new business plan was then costed and compared to the cost of liquidation. “The cost of implementing the new business plan would amount to more than NAD7 billion Namibian dollars (USD461.6 million). If we factor in the negative effects of COVID-19, the amount is expected to be significantly higher.”

Shiimi underlined that the government’s decision not to oppose the court case was “in the best interest of staff and future generation of Namibians”. The government would work closely with the staff and labour unions to safeguard their interests. “High-level consultations with all relevant stakeholders are ongoing and the nation will be updated going forward,” he said.

Editorial Comment: Updated with comment from Public Enterprises Minister Leon Jooste. - 01.02.2021 - 07:39 UTC