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Air Namibia splashes millions on lease deal

19 May 2016 Author  
front nakawa 20 May 2016The financially hamstrung national carrier Air Namibia is splashing millions of dollars of taxpayer money on an airplane lease deal after, committing to a US$6,500 per hour, 10-day deal with Portuguese charter airline Hi Fly.
 
Although sources say the wet lease agreement for an Airbus A340-500, which came into effect on 13 May, will cost the airline N$10 million for flights only, calculations by the Windhoek Observer show that the figure could be as a high as N$24 million for the 10-day period.
 
The agreement, which comes with a cabin crew, will also see the airline forking out for the plane’s fuel costs and other costs, in addition to the hourly lease charges.
 
The costs add a further dent to the airline’s precarious financial position, which has seen government continuously bailing it out, with the latest bailout a N$695.1 million windfall to cater for its operational expenses.
 
The airline is poised to receive a further N$733.44 million next year and N$757 million the year after from Treasury.
 
According to Air Namibia, the leased aircraft is meant to replace its own Airbus A330-200, which services the Windhoek to Frankfurt route.
 
This is due to a shortage of pilots to operate the route, after the unexpected illness of five of its senior captains.
 
The airline was, however, adamant that it had made the right business decision to enter into the lease agreement, despite the cost implications.
 
“We unfortunately cannot disclose transactional information between us and our suppliers. When flight disruptions occur, for whatever reason, airlines have different options available to them, and a number of things to consider, including the applicable legislation.
 
“In this instance we believe we have made the best decision, in the best interest of our passengers and the airline,” Air Namibia spokesperson Paul Nakawa told the Windhoek Observer.
 
“Please rest assured that in making our decision we considered all applicable costs, which for commercial reasons we cannot disclose to the media.”
 
Commenting on the airline’s five senior pilots who were booked off sick all at the same time, Nakawa said the occurrence was unfortunate.
 
“It doesn’t happen every day that five senior captains fall ill at the same time for various personal reasons. This is an unfortunate coincidence.
 
“Unfortunately, this happened at a time when our pilot pool is depleted, primarily because of decisions taken by the previous management early in 2015,” he said.
 
“We are currently increasing our pilot pool by contracting in pilots (mostly foreign), as a short to medium-term measure. But this takes time, because of the required screening and approvals.”
 
Public Enterprises Minister Leon Jooste said although the move could not be avoided, he was strongly against a repeat of the airline’s decision.
 
“The alternatives are limited and not that much cheaper necessarily. That has to weigh against customer satisfaction and the damage caused through the inconvenience of rerouting passengers via Johannesburg etc.
 
“Having said that, it is something which must be avoided at all cost in future, and I am requesting a formal risk mitigation strategy to convince us that they have measures in place to prevent this from reoccurring,” he said.
 
“It is an unfavourable measure (financially). I understand why they are doing it, but I don’t want to see it happening again. Continuous risk analysis and management is critical for all public enterprises and it is one of the corporate governance requirements we are requesting.
 
“For a complex entity like Air Namibia, with a substantial amount of unpredictable variables, it is exponentially more relevant.
 
“I had the opportunity to discuss this matter with Air Namibia and they explained the events which lead to this situation. “Considering the potential alternative options available to them, I am convinced that this decision was in the best interest of the airline’s clients, and that the measure will enable them to comply with the various layers of contractual responsibilities related to stakeholders,” Jooste added.

WINDHOEK OBSERVER

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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