Live within your means, Calle tells Air Namibia

21 September 2018 Author   Kaula Nhongo

Finance Minister, Calle Schlettwein, says Air Namibia should learn to live with what they are given while they find ways to operate at a profit.Finance Minister, Calle Schlettwein, says Air Namibia should learn to live with what they are given while they find ways to operate at a profit.

This comes after the national airline informed the Parliamentary Standing Committee on Economics and Public Administration on Wednesday that they would need about N$3 billion to become sustainable.
During the meeting with the committee, Air Namibia complained that unfavorable aircraft leases and non-lucrative routes were the main reasons why the company was not making a profit.
But in an interview with the Windhoek Observer on Thursday, Schlettwein said he is not satisfied with Air Namibia’s argument that plane leasing was the leading cause of losses.
“You can lease planes or find other means to operate without necessarily acquiring planes and still be profitable,” he said.
He added that by stating that they need N$3 billion, it shows that Air Namibia was making losses of that same amount.
“It is rather interesting, this only means that Air Namibia is closing losses of N$3 billion,” the minister said.
He, however, said he needed to first see the company’s turnaround strategy before he can comment further. 
Air Namibia has received about N$5.7 billion in government bailouts as at 2014 while their net loss for the same period was N$5.3 billion.
According to the airline’s Acting Finance Manager, Xavier Masule, the flag carrier contributed about N$316 million in tax revenue last year. 
Masule said bailouts from the government were mainly used for aircraft rental fees, maintenance and fuel.
He added that government funding could have been spent better if it was used to buy aircraft instead of paying lease fees.
“In the current strategic business plan, we aim to change this so that we move to aircraft ownership, such as the ERJ fleet which was changed in 2017.”
He said this could also be done with the A330s and A319s. 
Masule admitted that Air Namibia has not been able to get it right, despite the government bailouts.
He said things would have been better if there was a funding model where shareholder investments in the comparable business is in the form of capital assets such as aircraft, aviation training academies, maintenance of hanger and cargo handling facilities.
“This will remove the burden of aircraft ownership costs from operating revenue, strengthen the balance sheet, and lay a solid foundation for the future,” he said.
Masule said the airline has also been looking at alternatives to the Windhoek-Frankfurt route, which is one of the biggest loss-making operations, along with the Windhoek-Luanda route.
According to him, only one aircraft should service the Windhoek-Frankfurt route, and thus a new route must be found for the other A330 aircraft, or it must be returned or sub-leased.
A study is being done to determine whether to introduce a route to China via Luanda, or reintroduce a route to London via Harare or Accra, Ghana.
The airline also announced that it will introduce a Nairobi route next year.
With regard to route profitability for the period from April to July this year, Masule said only the Ondangwa (16.7 percent), Durban (3.1 percent) and Victoria Falls (5.6 percent) routes made profit.
Air Namibia anticipates that all its routes will break even by March next year except for Luanda and Frankfurt. 
These two routes showed losses of -63.2 percent and -47.1 percent, respectively.
Masule said the Airbus A330 used on the Frankfurt route is responsible for the biggest loss, but contributes significantly to tourism. 
This route is used for Namibian fish exports to Europe.
On each one-way leg of the Windhoek/Frankfurt route Air Namibia makes a loss of N$491,000.
He said the solution is to remove one aircraft from the route and deploy it on another route that is more viable.

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