Namibia: Cabinet Deciding Air Namibia's Fate

CABINET is deliberating on the long-term future of the country's national airline, Air Namibia, which needs billions of dollars to restore solvency.

The government has in the meantime made available a N$578 million guarantee for Air Namibia to sustain its operations until its final decision during the first quarter of 2020.

Public enterprises minister Leon Jooste, who confirmed the guarantee, said it should not be seen as a bailout plan. He explained that for Air Namibia to restore solvency and implement a new feasible business model, it would require between N$4,3 and N$5 billion, depending on various factors.

The airline wanted a N$1,6 billion bailout from the government in September for its operations, threatening that without the lifeline it would be forced to shut down.

During the same month, the airline announced that it was in a state of insolvency. The government was still considering whether to keep the financially troubled airline as a state-owned entity or offload it to a private investor.

Meanwhile, Jooste reiterated that the government agreed to extend a government guarantee, and not funds, to the value of N$578 million, which Air Namibia can use to raise financing from various financial institutions.

He said this is simply to allow them to sustain their operations until the first quarter of 2020 pending the outcome of a final Cabinet decision on the long-term future of the airline.

The minister further noted that the airline will need a large amount of money to restore solvency and Cabinet will have to weigh this request against the various other social and development programmes and projects competing for the same resources.

"A full bailout will require a great deal more and Cabinet will have to weigh this against the opportunity cost of funding other social or productive projects and programmes," Jooste said.

FUNDS DISBURSED

Following the government guarantee, Air Namibia, in December acquired the N$578 million loan from a local bank to settle its debts and normalise operations until the government's final decision.

These funds would go some way towards normalising the cash-strapped airline's operations until the first quarter of 2020 when the outcome of a final decision regarding the long-term future of the airline is expected to be announced.

Speaking to The Namibian, Air Namibia's acting chief executive officer, Xavier Masule, said the local financial institutions were approved to bid, a successful bank was selected, and the loan approved and disbursed in December 2019.

"We have access to the funds, and these are being used to pay for qualifying arrears invoices, including aircraft maintenance and other service providers, which will see our operations normalise soon," he said.

Masule could, however, not reveal the name of the bank that has provided the loan due to a confidentiality clause.

"The name of the bank, as well as the interest rate and repayment terms, is classified as confidential as per the loan agreement and may not be revealed," he said.

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