The Namibian government has confirmed it has decided to liquidate Air Namibia (SW, Windhoek Int'l) as it can no longer afford to support it at the expense of national economic recovery, however, it has not closed the door on starting another airline in the future should it suit the country’s developmental goals.

At a press conference streamed live from the capital, Windhoek, Finance Minister Ipumbu Shiimi said the Cabinet had not made the decision lightly, but the airline's debt was unsustainable and a continued bailout would have put the country’s post-COVID-19 economic recovery plan at risk. “The decision to liquidate was not taken lightly. All options were considered,” he said. This had included engagement with other airlines for potential investment/partnerships and various business plans to turnaround the company. “The Government believes that the decision taken is in the long-term interest of the country, taking into consideration the loss-making history of the national airline,” he said. Namibia to date has forked out NAD8 billion Namibian dollars (USD547 million) to bail out the flag carrier, while a turnaround plan was estimated to have cost another NAD7 billion (USD478 million).

Public Enterprises Minister Leon Jooste said at this stage, the government was not considering starting another airline. However, he did not exclude the possibility in the future: “If there is value for a new airline and if it fits into our development goals at an opportune time - but at the moment we are not discussing that,” he said.

Jooste revealed that Air Namibia’s liabilities outstripped its assets by more than NAD2 billion (USD136.7 million) at its latest evaluation at the end of August 2020. He said its assets at the time were valued at NAD981 million (USD67 million) - which included the book values at the time of the airline’s two owned A319-100s - while its liabilities totalled NAD3 billion (USD205 million), excluding the leases of two further A319-100s and two A330-200s plus penalties for cancelling those leases. Shiimi mentioned a sum of NAD2 billion (USD136.7 million) in connection with government guarantees on aircraft leases, which would have to be paid, whether or not the airline was liquidated.

Jooste pointed out that apart from its historic debt burden, Air Namibia had operated with a flawed business model in a small market economy, using the wrong aircraft, on the wrong routes, with too many employees. He said when grounded during the country’s COVID-19 lockdown last year, Air Namibia had lost less money per month than when operating. “They were losing NAD190 million (USD12.9 million) per month when operating and NAD111 million (USD7.55 million) per month when not operating,” he said.

He said a new business plan devised by the previous board would have required a radical redesign of the airline, including a different fleet and network. Despite this, the airline would have been unable to operate internationally as the leases on the Airbus (AIB, Toulouse Blagnac) aircraft were too expensive, while Namibia’s geographic location far from large markets also made long-haul operations unsustainable.

As a result, the ministers revealed, the government had some time ago decided to liquidate Air Namibia and had already concluded discussions to terminate the leases on the Airbus aircraft. However, the government had recently come under pressure following a EUR 9.9 million euro (USD12 million) out-of-court settlement between Air Namibia and the liquidators of defunct Belgian carrier Challengair (1I, Brussels National), with the first instalment of EUR5 million (USD6 million) due on February 18.

Jooste said the government had not yet decided what to do about this payment. “At this moment, Air Namibia does not have the funds for that and there are implications for the shareholder should we make the funds available. I don’t want to share anything further. No decision has been taken, we need to further gather facts, this has not been concluded, when we have, we will discuss it at Cabinet level,” he said.

Shiimi denied allegations reported in the Namibian media that the government was deliberately closing down the airline to further the growth of private carrier FlyWestair (WV, Windhoek Eros) and that discussions had taken place between the parties for the sale of Air Namibia’s four owned EMB-135LRs. “This information is totally misleading and devoid of any truth,” he said.

Jooste also denied public allegations that he had a vested interest in closing down Air Namibia. “I can 100% confirm that I have no shares in FlyWestair or any of its subsidiaries or any related companies,” he said.

He said the government in 2017 had gotten involved to secure the four EMB-135LRs from HOP! on the expiry of their leases, after FlyWestair had shown interest in the aircraft.

Shiimi also clarified that staff members of the finance and public enterprise's ministries had been appointed to serve as interim board members following the resignation of the previous board on February 3. They include Marten Ashikoto, Director of Assets, Cash and Debt Management in the Ministry of Finance, and Tjiuee Kaura, Director at the Ministry of Public Enterprises.

The interim board members, together with Air Namibia management will work out the modalities of the winding down of the company, including the schedules of payments to the employees and the protection of assets in possession of the company. Jooste confirmed that employees would receive full severance packages, plus an ex-gratia payment to the value of 12-months' salary.