Air Namibia edges towards collapse

02 March 2018 Author   Kaula Nhongo

Staff of ailing national carrier Air Namibia are in panic mode as fears of a possible collapse of the airline looms large after acting Managing Director, Mandi Samson, indicated this week that they were facing severe cash flow challenges.

The Namibian reported on Tuesday that banks were refusing to grant the State-owned carrier credit to fund day-to-day operations after it failed to publish annual reports for over 10 years.

The cash flow challenges come at a time when Public Enterprises Minister, Leon Jooste, has said that the State can no longer afford to bail- out loss-making State companies due to a severe cash crunch.

“Unfortunately our current economic status cannot allow for things to remain the same,” Jooste said on Monday.

Air Namibia is one of the SOEs heavily dependent on government subsidies for survival, receiving over N$6 billion since 2000, according to media reports.

The airline has struggled to stay afloat despite being allocated N$486 million in the 2017/18 financial year.

It is also set to receive N$494 million for 2018/19, and N$498 million for 2019/20.

Staff members attribute the airline’s woes to a plethora of bad decisions which they claim has left the country’s branded carrier in a bad state.

Sources believe that the airline is suffering mainly because of bad deals that it made in the past which include the leasing of an Airbus A330-200 fleet (reg number V5/ANP and V5/ANO) which the company is renting from US-based lessor Intrepid Aviation for N$14.3 million (US$1.2 million) per month per aircraft.

The current lease agreement is for 12 years, which means that in the event that Air Namibia runs into trouble government, as the guarantor, would still be forced to pay the lessor.

Sources say the situation at Air Namibia is so bad that it has contemplated selling the two A319-100 planes that it bought from Airbus in 2013 or use them as collateral to acquire loans from banks, adding that the carrier has resorted to cutting daily allowances for flight crews abroad.

Previously, flight crew members received 123 Euros per day for international flights which has since been cut to 85 Euros though the airline fully covers their accommodation, ground transport to the airport, meals at the hotel and any emergency expenses.

For SADC and domestic flights, the daily allowances have been scratched from the previous N$300, sources claimed. The Air Namibia staff attributed the dire financial situation at Namibia to inexperienced management which also includes the various boards that have been making bad decisions for many years.

A source gave an example of how the former Acting Managing Director, Rene Gsponer, left the company in a fix when he opted to lease the Airbus A330-200 fleet.

“After opting to lease planes, Air Namibia went to Airbus to make arrangement and they were offered to lease the planes for US$750,000, but Gsponer ended up getting a third party involved and the price went up by US$500,000,” one airline source said.

Another source also bemoaned government’s decision to appoint board members with no aviation background.

“Air Namibia is a joke. How do you appoint a board with no background in the field and expect them to turn the company around. Air Namibia is competing with big airlines such as Emirates and Qatar, we do not have a chance at all,” the source complained.

When quizzed about the allegations, Air Namibia Corporate Communications Officer, Twaku Kayofa, said the company has no intentions to sell its Airbus A319 fleet.

“The aircraft are national assets and there has not been any discussion on selling these assets. Air Namibia is wholly owned by the Government of the Republic of Namibia, and its assets are equally owned by the shareholder. The lease amount is lower than the one leaked to the media. However, since the lease agreement contains a confidentiality clause, Air Namibia is in no position to divulge the monthly amount,” Kayofa said.

She said Air Namibia is looking into introducing cost-cutting measures for the sustainability of the business.

“All cost elements are regularly reviewed. Our efforts are geared towards reducing expenses and increasing revenue. It is a going concern and it will be very difficult to share exact figures. The airline business is a cost intensive industry. We receive invoices for operational costs on a monthly basis and Air Namibia is managing these debts,” Kayofa said

She added that these are very difficult times for local airlines and other businesses.

“As the economic activities are slowing down in the country, we are seeing less travel demands from ordinary domestic leisure, corporate and government travellers.

“On a positive note, we are happy to announce that demand from international travellers is increasing, which has a positive impact on tourism,” Kayofa stated.

For years, Air Namibia has struggled to settle landing fees and airport taxes owed to the Namibia Airports Company totalling N$250 million.

Last year, it was forced to scrounge for N$50 million to pay for aircraft leases and other bills after the transport ministry said it would not be able to foot their bill.

Air Namibia’s monthly expenses are said to be around N$300 million, which include, among others, aircraft leases of N$28 million for two Airbus A330-200 planes (244-seater), and N$3 million for four Embraer ERJ 135 (37-seater) planes and an N$80 million fuel bill for 10 aircraft.

The figures listing the airline’s monthly gross revenues, however, are unavailable.

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