Air Namibia: A bum investment

24 January 2013
Author  

The time has finally come for Government to apply the brakes and stop pouring billions of dollars in taxpayer’s money into the bottomless pit called Air Namibia. From a business viewpoint, the company has been a complete turkey ever since its creation in October 1991.

 

It has never been able to operate as a going concern or able to become self-sustaining in over two decades of existence.

Instead, it has become a millstone around the neck of this country and has squandered billions in precious taxpayer’s money that we could have allocated to more urgent priorities.

Over the years, the management of the airline has shown stupendously bad judgement in the business decisions it has made.

The best example is perhaps the airlines decision to purchase a Boeing 747-400 Combi jumbo jet in 1999 at a cost of N$1 billion to operate on its international routes to London and Frankfurt.

Anyone with a lick of sense, and any knowledge of aviation, knows the Windhoek-Frankfurt-London routes constitute what the airline industry describes long, thin routes – meaning low passenger volumes but long flight distances.

Only God knows what genius actually thought the airline could operate a high passenger volume aircraft such as the 747-400 profitably on such routes.

Most of the time, the exorbitantly expensive aircraft probably flew around with less than 50 percent of its passenger capacity, while consuming vast amounts of aviation fuel.

This topped the only slightly less stupid decision the year before to operate a converted cargo plane as a passenger airliner on the route.

Whenever you flew in this plane, you could somehow always sense that you were flying in a cargo plane pimped up as a passenger aircraft.

How Air Namibia ever hoped to attract premium-price passengers on such an aircraft defies all understanding.

To make matters worse, widespread anecdotal evidence exists alleging endemic corruption inside Air Namibia.

The stories are legion of managers at Air Namibia demanding bribes from young women aspiring to become airhostesses.

There is the infamous story of a faulty Boeing 737 engine that the company could have sent back to the manufacturer for repair at no cost because it was still under warranty.

Instead, the company allegedly chose to send it to a third-party aircraft maintenance facility for repair at a massive cost. Someone must have done very well out of that deal.

The most frightening aspect of it all is that no one seems to have tallied up the total, inflation-adjusted amount Air Namibia has received in subsidies since October 1991.

In 2007, former chairperson of the Parliamentary Standing Committee on Public Accounts, Johan de Waal, disclosed that Air Namibia had received N$1.5 billion in Government subsidies between 2004 and 2007.

This week Die Republikein reported that the airline devoured slightly over N$1 billion in subsidies in the current book year alone.

The problem is that we also receive piecemeal figures on the subsidies Government has paid to Air Namibia, not the accumulated total for the past 21 years.

The accumulated total could quite conceivably exceed N$5 billion – all money thrown down the toilet.

Many, many years ago Time Magazine made a quite perceptive observation, which read as follows:

“Along with a flag and an anthem, the symbols of nationhood all too often include a money-losing national airline.”

We are a relative poor country with a small population and we should learn to live within our means.

At the same time, Namibia has a vast physical land mass, which means valid reasons exist for the country to have some form of national airline.

For a country as big as Namibia, we require modern forms of transportation to reach remote parts of the country speedily and efficiently.

This however, does not necessarily mean that we need a national air carrier that flies international routes.

The lame – and frankly fallacious – argument that people often use, is that subsidies to the national air carrier help to underpin and grow the tourism industry.

Our own columnist Jackie Asheeke was a strong advocate of this view when serving as managing director of the Federation of Namibia Tourism Association (Fenata).

Air Namibia Head of Corporate Communications Paul Nakawa recently repeated this hoary old myth, claiming that Air Namibia contributes 12,000 jobs to the national economy.

Absolutely no evidence exists to show any correlation between having a nationally-owned international air carrier and the number of tourist arrivals.

Despite having a heavily subsidised international flag carrier, Namibia only received 1,178,487 tourists in 2010.

Botswana’s national airline, Air Botswana, only flies domestically and to a limited number of regional destinations including Johannesburg, Cape Town and Harare.

Nevertheless, Botswana had 2,145,000 tourist arrivals in 2010 – almost double the number of tourists that came to Namibia.

Zambia does not even have a state-owned national airline but it still managed to attract 815,000 tourists in 2010 – only 363,487 tourists less than Namibia.

However, Zambia does not even have a state-owned national airline in any shape or form whatsoever.

Let’s assume Air Namibia received roughly N$3.5 billion in subsidies in the 19 years up to 2010

That means that over 19 years the Namibian taxpayer subsidised each tourist by N$9,629 just so we could achieve 363,487 more tourists than Zambia. The reality is that the figure could be much higher.

Over 19 years we further subsidised each of the 12,000 we have created in the tourism industry with N$291,666 for each job.

Hooray! This is hardly what you would call a worthwhile business proposition. Both Botswana and Zambia have achieved far better results but at a much lower cost.

Case closed! We hope we never have to hear this irrational argument about how Air Namibia is essential to the local tourism industry ever again.

Namibia taxpayers continue to take a bath on the billions of Namibia dollars they have invested in Air Namibia over the years, and the investment will in all likelihood remain under water forever.

It is time we cut our losses; put our foot down and say no more.

There is a wonderful old saying, which goes as follows:

“Insanity is repeating the same mistakes and expecting different results.”

Well, the fact is, our Government is not insane, whatever some of us might want to believe.

Therefore, if our Government is not insane, why does it keep repeating the same mistakes over and over again, flying in the face of all reason and all logic?

Permanent Secretary in the Ministry of Works and Transport Peter Mwatile gave some clues to the answer this week.

Mwatile said Government would not subsidise the operational budget of Air Namibia, but only capital expenditure.

However, if Government is the sole shareholder in Air Namibia, and if Air Namibia is of such cardinal importance to Namibia, what difference does it make whether it subsidises the operational or capital budget.

The reason is simple. There are slim pickings in operational budgets in terms of receiving kickbacks whereas capital expenditure budgets offer boundless opportunities.

It is for this same reason that our politicians and top public servants have such a huge appetite for buying massively expensive equipment in whatever form.

This includes useless Chinese locomotives, customs X-ray machines, helicopters that no one ever sees flying anywhere and, of course, Airbus aircraft that they know we don’t need.

This is how corruption distorts development and how it skews priorities.

We have to curb our tendency toward delusions of grandeur. We are a small country with limited capacity. We can ill-afford to operate inter-continental airline services.

Air Namibia should outsource international flights to Namibia to for example, Air Berlin, or any other international airline for that matter.

In terms of the agreement, we could negotiate that the carrier paints one of its aircraft in Air Namibia colours and also employs some Namibian crew to operate the aircraft.

These airlines have the capacity to carry the overhead required to operate an international service – something Air Namibia does not have, and will never have.

The national carrier should return to basics and concentrate on its core mandate of providing efficient air transportation within Namibia and regionally.

This is the only way we can prevent Air Namibia from continuing to suck every last drop of blood and the very life out of the Namibian people.

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The Windhoek Observer is an English-language weekly newspaper, published in Namibia by Paragon Investment Holding. It is the country's oldest and largest circulating weekly.

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