Cabinet committee ignores Air Namibia’s profitability plan
By Hilary Mare
THE Cabinet Committee on Treasury (CCT) is pushing for the liquidation of Air Namibia despite indications that it could break-even in three years and cut losses by more N$700 million if they terminate the Frankfurt route.
The business plan seen by Confidente shows that Air Namibia’s expected loss of N$1.28 billion would be drastically reduced to approximately N$500 million in 2020.
The national airline projects that its revenue base will increase from N$1.4 billion to N$1.9 billion, operational costs will reduce from N$2.7 billion to N$1.7 billion and profit margins will increase from -N$1.27 billion to N$148 million over a five-year period.
Confidente has it on good authority that the Frankfurt route contributes to approximately 80 percent loss for Air Namibia due to the high leasing and operating costs of the two A330 aircraft that operate that route. Even at a load factor of 99 percent on the prevailing fares and cost levels, and addition of new long-haul routes to increase aircraft utilisation, this route is still loss-making.
Alternatively CCT wants Cabinet, while winding down Air Namibia, to simultaneously create a new national airline.
Air Namibia is currently the only viable airline in Southern Africa – with Air Zimbabwe, Zambian Airways, Air Botswana, Malawi Airlines and others having dismally failed. South African Airways is currently also in financial doldrums.
It is feared that starting a new airline could be more costly and take several years while competing brands like Westair could capitalise on the routes currently operated by Air Namibia and make it impossible for a future national airline to take off.
Taking the recommendation of CCT (headed by the Ministry of Finance) into consideration, the Cabinet Committee on Overall Policy and Priorities (CCOPP) recently asked CCT to first work out a comprehensive and tabulated breakdown of the financial implications, timelines and other related matters of maintaining the current Air Namibia, proposed liquidation of the airline, creation of a new Air Namibia and remuneration of employees for a period of 12 months.
Air Namibia employs 780 employees.
Confidente is reliably informed that the crunch feedback session is scheduled for today where the CCT will defend its position and lay bare various costs attached to the options that have been put on the table.
“The question of liquidating Air Namibia is with Cabinet and they are yet to sit on this option and various alternatives. As a ministry it’s not in our mandate to propose if a public enterprise should be liquidated or not. However, it is important to note that we had approached treasury and asked for a bailout for Air Namibia but we were turned down and asked to go and work on other viable options,” Public Enterprise Minister, Leon Jooste told Confidente this week.
It has also been reported that past estimates show the government would spend up to N$2.5 billion to close the national airline.
Pushing for continuity, Air Namibia’s ISBP 2020-2025 also proposes replacing the rather huge A330s and A319s aircraft with more suitable 90 – 100-seater planes which have a more favourable cost base which is better aligned with the addressable markets.
Total costs considering subleasing the two A330 is US$89.6 million (N$1.5 billion) from January 2021.
With the strategic focus now primed for at enhancing the regional and domestic operations, Air Namibia plans to liaise with government to conclude the Bilateral Air Service Agreements (BASA) with various countries so that it can gain access to new markets.
The airline already has traffic rights to make use of codeshare agreements with Cuba, Ethiopia, Germany, Ghana, Kenya, Nigeria, Qatar, Turkey, United Arab Emirates and USA. Apart from this, Air Namibia will also seek to be a member of one of the global airline alliances namely Oneworld, SkyTeam or Star Alliance.
Secretary General of the National Union of Namibian Workers (NUNW) Job Munairo said that liquidation of Air Namibia was an undesirable option that should not be allowed to go ahead.
“We cannot let our national pride go under the hammer; we just need to find ways to manage it properly. I think no one wants to see Air Namibia liquidated and another airline entrusted with the responsibility to carry the national flag. Today it is Air Namibia; tomorrow it will be other parastatals such as Nampower, TransNamibia etc that will be shut down when they fail to make profits. If another airline can come in and succeed then why can’t Air Namibia also do well?” he said adding that, “Everyone knows why some people are pushing for the airline to be liquidated.”
The 2018–2035 Namibian transport policy recognises Air Namibia as an essential pillar of the economy since it supports many sectors through the provision of air service connectivity within and outside the country.
“We, together with the federation are engaging the government. Liquidation is part of the options on the table but not definite hence I cannot comment further,” Willem Claasen president of the Namibia Transport and Allied Workers Union (NATAU) said.