IN a media statement released on Friday by minister of finance Iipumbu Shiimi, he said the government takes note of an agreement reached between Air Namibia and Challenge Air to settle the ongoing matter of the national airline’s money woes.
He said it is a well-known fact that Air Namibia has been a loss-making entity since its inception and currently requires substantial amounts of money to bail it out from its current debt predicament.
He said about N$8,4 billion has been spent to bail the airline out in the past 10 years.
Over the past few months, Shiimi said, the government has analysed Air Namibia to understand the core reasons for its commercial failures.
The analysis revealed the airline was operating with a flawed business model which involved 15 out of 19 loss-making routes in 2019.
The highest loss-making route was the Frankfurt route, which incurred major losses due to high fixed costs and under-utilisation, the minister said.
It also became clear that the combination of the types of aircraft, routes, high employee numbers, and other structural inefficiencies contributed to the financial distress of the company.
Shiimi said a new business plan was costed and compared to the cost of liquidation.
The cost of implementing the new business plan would amount to more than N$7 billion.
“lf we factor in the negative effects of Covid-19, the amount is expected to be significantly higher,” he said.
He said the government in 2019 approached all airlines currently operating in Namibia, as well as those that intend to operate in Namibia to assess if there would be any appetite to attract a strategic partner or investment for Air Namibia.
All airlines that were approached declined, he said.
The minister said the recovery of the industry from the pandemic’s impact is projected to be a slow process.
The pandemic has equally impacted the ability of the government as a shareholder of Air Namibia to make adequate funding available.
As a shareholder, the government will study the settlement agreement between Challenge Air and Air Namibia, he said.
“In the coming days, we will communicate transparently with all stakeholders in the best interests of Namibian taxpayers and citizens,” Shiimi said.
“Finally, I would like to assure the staff of Air Namibia and the public at large that the government’s decision not to oppose the court case is in the best interest of staff and future generations of Namibians. As a caring government, we stand ready to work closely with Air Namibia’s staff, through their representative labour unions to ensure that their interests are safeguarded,” the minister said.
