18 May 2017

Namibia: Air Namibia States Its Need to Exist

Windhoek — According to Oxford Economics, Namibia stands to lose nearly a billion dollars in revenue if Air Namibia ceases to exist as a national airline.

There too would be millions of dollars in revenue losses should the airline cease to operate the much debated directed route between Windhoek and Frankfurt, Germany, it was further argued during a high-level meeting held here yesterday.

The losses, explained the consultants at Oxford Economics yesterday, can be as much as half of N$718 million that was Air Namibia's indirect GDP contribution in 2015/16, as a result of supply chain activities linked to the airline's procurement.

They forecast that Air Namibia's contribution to GDP would be as high as N$1.7 billion by year 2020/21.

The contribution calculation was based on the direct wages and salaries that the national airline pays to its employees, and the N$1 billion that Air Namibia paid to domestic suppliers. It uses figures from the 2015/16 financial year.

Presenting the findings was the director of consulting for Oxford Economics Ian Mulheirn, at a stakeholder conference in Windhoek, where Air Namibia presented its case to a room packed with economists, cabinet ministers, diplomats, and representatives of the private sector.

The discussion took place at a time when the finance minister Calle Schlettwein has proposed that Air Namibia abandon its direct route between Namibia and Frankfurt to save costs, which Treasury has put at N$30 million annually, but a figure which the national airline says has since become less.

New Era understands that the debate on whether or not Air Namibia should abandon the Frankfurt route is expected to feature prominently at the upcoming Cabinet Committee on Overall Policy and Priorities, which is chaired by President Hage Geingob.

Yesterday the Works and Transport Minister Alpheus !Naruseb did not venture an opinion on the topic, letting the experts present their case. The closest he came to opine on the subject was to say that "as a ministry we have no interest in mingling in your day to day management of the business". !Naruseb also assured that "government is committed to having a national airline for the country" and cited the millions of dollars in government subsidies and guarantees to Air Namibia over the years as evidence of that commitment.

However, Air Namibia's acting managing director, Advocate Mandi Simpson, said the public need to "look at the bigger picture and look at what we take [in government subsidies] and what we bring to the economy".

The presentation of new figures, says Simpson, would hopefully present an alternative set of facts to the debate and assist those making decisions, as well as the public, when they ask themselves the question 'why does the country need an airline that continues to gulp up millions of dollars that could otherwise be spent on hospitals?'

Simpson was also adamant that financial improvements at the airline have started, with this year being the first year of implementing the new five-year strategic plan that aims at stopping financial seepages and attaining financial sustainability.

According to Mulheirn, the economic benefits can be quantified by the fact that "tax revenues generated by the activity sustained by Air Namibia were equivalent to 55 percent of the subsidy the airline received in 2015/16."

"Beyond its core impact, Air Namibia also delivers benefits via the activities it services, to enable connecting people and businesses internationally, boosting competition and trade, knowledge transfers, foreign investment and tourism," he says.

In addition, the absence of Air Namibia would also mean the economic contribution by other airlines operating in Namibia would only be confined to the purchase of fuel when they depart from the airport. The N$1 billion that Air Namibia spends on local suppliers would be gone. Air Namibia also spends an additional N$970 million on foreign suppliers.

Further, the assumptions that new airlines now operating intercontinental routes from Namibia would absorb passengers, and continue to bring in tourists and travellers, omit a few crucial facts. These being that the Frankfurt route is a direct one, and removing it would convince nearly half of those passengers to find alternative destinations, where they do not have to use connection flights and incur additional airfare costs.

"The reduction in passenger numbers means fewer visitors arriving in Namibia, and a substantial drop in the economic impact of tourism facilitated by Air Namibia," says Mulheirn.

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