Namibia: The End - Air Namibia Shutdown to Cost Billions

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12 February 2021

The government will spend around N$300 million to pay salaries of Air Namibia employees who will stay at home while the 74-year-old airline is shut down.

The closure of the national airline marks the end of an institution that has gobbled up N$11 billion in government bailouts over the past two decades.

Sources told The Namibian that Air Namibia's monthly wage bill is between N$25 million and N$30 million.

Air Namibia has been on death row for the past three years, but its fall from grace was reinforced this week when the Cabinet was briefed that last year's decision to liquidate the airline will prevail.

Ministers have reportedly been debating on whether the Cabinet should stick to the liquidation decision.

"The answer to that is that liquidation still stands," a source familiar with the Cabinet discussion said.

The national airline's troubles have been long-coming.

And they involve politicians and executives who often used Air Namibia as a cash cow.

President Hage Geingob has for years supported the airline.

In October 1999, Geingob - as prime minister- welcomed Air Namibia's brand new Boeing 747-400, which cost around N$700 million.

That deal was clouded with allegations of bribery and signalled continued support from the government.

In fact, the government agreed to pay an additional N$2 billion to Air Namibia from 2001 to 2002.

NAIL IN THE COFFIN

Minister of finance Iipumbu Shiimi said the Cabinet has decided that it is in the best interest of the country to file for voluntary liquidation.

He said the airline has not been profitable since its inception.

Speaking at a press conference yesterday, Shiimi said the government spent billions of dollars to support the airline, but cannot keep sustaining it at the expense of other pertinent issues, such as economic growth and social services.

"It must be noted that the government considered all other options . . ," he said.

Shiimi said the liquidation of the airline would cost N$2 billion.

He said liquidation costs are not always the responsibility of the shareholder, but funds may be generated by selling the company's assets.

Air Namibia's assets at book value stood at N$981 million as at August 2020, while the airline's liabilities stood at N$3 billion over the review period.

Shiimi said the government has committed to paying employees' salaries for 12 months.

It will also consult the temporary board on the winding up of operations.

"That includes the schedule of payments to the employees and the protection of assets," Shiimi said.

Shiimi denied information that the government wants to close Air Namibia to advance another airline.

'SOARING DEBTS'

He said: "This information is totally misleading and devoid of any truth. The history of Air Namibia is well known and the government can no longer carry this burden, given Air Namibia's soaring debts."

Minister of public enterprises Leon Jooste said the government explored various options to avoid liquidation, but all options proved to be futile.

He said the government has to date spent N$11 billion on the struggling airline.

Jooste corroborated Shiimi's sentiments on the government not promoting the growth of another airline, but said the liquidation decision was already in the pipeline.

"The discussions that we have had leading up to the conclusion we have reached, were done quite a considerable time ago already. So, there were obviously a number of issues that needed to be resolved. One of them had been a very complicated issue of the lease agreements we have on the two Airbus aircraft, and the fact that they are fully backed by a government guarantee," Jooste said.

One of the issues Jooste mentioned was the fact that the airline was losing more money when operational than when operations ceased.

He said the airline lost N$111 million monthly during the Covid-19-imposed lockdown, compared to N$119 million monthly when operating.

"They were actually losing less than when they were operating because the business model is so flawed. When the minister says all options were explored, we mean all options," Jooste said.

NEW DIRECTORS

The minister was queried about the new board and said he appointed it to assist with the liquidation process.

He appointed businessman James Cummings, lawyer Norman Tjombe and Hilda Basson-Namundjebo as board members of Air Namibia last week. This was, however, rejected.

Two government officials were instead appointed.

Meanwhile, the two ministers said it was deemed as best for the new interim board members to be from both the finance and public enterprises ministries.

The two new directors are Martin Ashikoto, from the finance ministry, and Tjiuee Kaura, from the public enterprises ministry.

DIVIDED NATION

Air Namibia's demise has divided opinion.

Rally for Democracy and Progress leader Mike Kavekotora says he supports the decision by the Cabinet to liquidate and close down Air Namibia.

Kavekotora is one of the members of parliament who have been calling for the closing down of parastatals that have been "technically insolvent for years".

"We don't need to be emotional about it. We currently have an airline which is basically a bottomless pit. It has been a liability. The money we have been pumping into Air Namibia as a nation went into billions and billions of dollars. This is money that could have been used for other pertinent issues such as education and health," Kavekotora said.

"I only hope that the decision to liquidate Air Namibia is not politically motivated to the benefit of the politically connected people as we have been hearing in the papers," he said.

Kavekotora said he does not support the narrative of maintaining a national airline for the sake of it.

"I am not buying into that argument of just wanting to see the Namibian flag on an airline. That is nonsense ... If something does not work, you just have to kill it. And this applies to many technically insolvent state-owned enterprises," he said.

Institute for Public Policy Research director Graham Hopwood also supports the Cabinet's decision.

He said: "Air Namibia has not produced any audited financial statements over the years. You can't run a business like that and expect it to continue ... it is very sad, but it is inevitable that it has to happen."

Popular Democratic Movement parliamentarian Nico Smit says although the decision has far-reaching effects on its more than 600 employees and their beneficiaries it was the right decision, since the airline has been running at a loss.

"It is a difficult situation but it all comes down to the mismanagement of Air Namibia from day one. If the business is not making profit, it is very unwise to continue with it," he said.

A former minister of works and transport, Helmut Angula, described the planned liquidation as "horrible news".

"We are at the mercy of capitalists who are killing the national airline to appease bookkeepers. Everything is done at the stroke of a pen."

He asked what would happen to specialised employees such as pilots in a local industry that lacks other airlines.

"Will they become farmers like me? What will happen to the technology which took us years to acquire?" he asked.

Angula said talks of establishing another airline shouldn't be entertained.

"People are no longer thinking well. Countries that killed their national airlines are struggling to bring them back. All the successful airlines in the world are indirectly or directly supported by the government," he said.

Former prime minister Nahas Angula was shocked to hear that the government has decided to shut down Air Namibia.

"I was not aware. This is news to me. Everything appears to be failing in this country. I am sorry about the workers who now have to go into the streets," he said.

PROMISES IN THE DARK

Between 2003 and 2009, the government splashed about N$2 billion on Air Namibia to turn its fortunes around. Not much was achieved.

In 2011, Air Namibia's management formulated another five-year turnaround strategy and convinced the government that it would lead to the airline breaking even.

The government chipped in with N$1,6 billion. From that turnaround a bit of success was achieved, according to its former acting managing director Rene Gsponer.

At the time, Gsponer said Air Namibia averaged N$188 million between July and October 2014.

He said Air Namibia made a record high of N$205 million in October 2014, making it the first time in history that the airline broke even and made a profit in four consecutive months.

However, that success was shortlived as Air Namibia was soon back to its begging ways.

In the 2015/16 financial year the government allocated N$579,8 million to Air Namibia.

The budget was then increased to N$722,4 million in the 2016/17 financial year.

The government allocated another N$629,6 million for the 2017/18 financial year.

A N$740 million subsidy for the airline was also budgeted for in 2018/19.

A further assistance of N$676 million was budgeted for in 2019/20, while N$698 million was allocated in 2020/21.

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