Namibia: Sad but Inevitable... Troubled Flag-Carrier Flies Out of Business

12 February 2021

Emotions ran high yesterday when Namibians officially said goodbye to the national flag carrier after the government opted for its voluntary liquidation following uninterrupted operations spanning for some 75 years. Financials from a few months ago indicated that Air Namibia's liabilities as at August 2020 totalled about N$3 billion compared to liabilities of N$981 million.

Needless to say the controversial and painful decision to close down Air Namibia, which has far-reaching implications for airline staff and the tourism industry at large, was not totally unexpected and was not taken lightly.

This is because the government has for three decades tried to save the struggling state-owned enterprise and has over the years pumped more than N$8 billion into the beleaguered airline through constant bailouts and cash injections.

Making the announcement yesterday finance minister Iipumbu Shiimi said: "This difficult decision was taken after careful consideration of the various options to save the national airline. All options assessed point to the fact that the national airline is not profitable and it has not been profitable since its inception.

The net economic costs of Air Namibia's operations far outstrip the net gains and it is thus unsustainable." Shiimi noted that at this stage the country's economy can no longer afford to perpetually provide financial support to Air Namibia at the expense of supporting economic growth and critical social services.

"It must be noted that government considered all other options which included engagement with other airlines for potential investment/partnership, and various business plans to turn around the company," Shiimi explained.

At yesterday's media briefing the finance minister also clarified reports that the liquidation process is going to cost government over N$2 billion, saying: "It is important to note that the cost of liquidation is not generally borne by shareholders, in this case government. Liquidation expenses are normally paid out of the proceeds of the sale of assets of the company that is being liquidated.

It appears that people confuse the money that government has to pay to the owners of the aircraft that Air Namibia is leasing and for which government has provided guarantees in the past. This money would have to be paid, whether or not Air Namibia continues with operations or is liquidated."

As a shareholder, government assured the airline's more than 600 employees that their welfare remains a priority. For this reason the state has committed to an ex-gratia payment to the value of 12 months' salary for each employee.

"We will continue with consultations with the interim board and the management to work out detailed modalities of winding up the operations of the current Air Namibia and that includes the schedule of payments to the employees and the protection of the assets in the possession of the company and the nation will be informed in this regard," Shiimi added.

By undertaking voluntary liquidation Air Namibia has enacted its non-court ordered self-imposed winding-up and dissolution as approved by its shareholder, the government.

Normally such a decision means Air Namibia's leadership confirms that it has no reason to continue operating.

Also present at yesterday's announcement was public enterprises minister Leon Jooste, who admitted the liquidation decision was a traumatic experience and made it clear that the reason for Air Namibia's failure, besides its historic debt and enormous liabilities, was a flawed business model which utilised the wrong aircraft for the wrong routes.

For instance, said Jooste, Air Namibia should not have been operating long-haul flights due to high operational expenditure and economies of scale.

Responding to a question on Air Namibia's settlement agreement with Challenge Air, Jooste said: "Air Namibia has no funds to make the payment and there are legal implications if the shareholder were to make the funds available." He added that following a legal opinion he feels TransNamib, under whose jurisdiction Air Namibia used to operate, needs not to be concerned about undue consequences, although he cautioned that this legal concern is "still a red flag".

Reactions

At a heated media briefing earlier in the day the National Union of Namibian Workers (NUNW) called for an immediate stop to the liquidation process and also demanded Jooste's dismissal.

The union warned that if the liquidation is not stopped they will embark on national mass action. "NUNW therefore calls upon all citizens of Namibia to stand by these demands and save the nation from total economic collapse," said NUNW general secretary Job Muniaro.

Meanwhile, Cabin Crew Union president Reginald Kock said the nation cannot allow the continued onslaught against state-owned enterprises through deliberate attempts to collapse them. Kock also repeated allegations about dubious dealings involving self-enrichment which he said is to blame for the airline's downfall.

"We reject this voluntary liquidation as a sustained effort by a few individuals to collapse the airline for personal gain," Kock alleged.

Furthermore, Swapo Youth League (SPYL) secretary Ephraim Nekongo noted that for the past 12 months, as the youth wing of the ruling party, they have been engaging both party leadership and government on the liquidation of Air Namibia.

"The militant wing has presented its case for the national airline not to be liquidated on the expense of white monopoly capital yet we are aggrieved to see Cabinet going ahead with liquidation. We maintain our grounds that we do not agree with the liquidation of Air Namibia," said Nekongo.

Also, SPYL, through its regional secretary for Khomas, Paulus Emmanuel, called the dissolution of Air Namibia "very unfortunate and detrimental to the airline and the Namibian economy at large".

Adding that the government should do all in its power to avoid total collapse, Emmanuel remained adamant that providing the necessary financial and political support for a leaner, more competitive and sustainable airline is needed to salvage national pride.

"Khomas SPYL urges the government to follow in the steps of other governments In Africa and beyond who realize the importance of supporting their national airlines, such as Kenya, Ethiopia, Qatar, etc," Emmanuel reasoned.

Regional impact

Commenting from South Africa on the liquidation of Namibia's national airline, well-known aviation industry expert, Linden Burns, told New Era that while all-important air connectivity to Namibia is still being provided via Johannesburg and Cape Town by Airlink and to a lesser extent by Westair, the liquidation decision will ultimately hamper long-term economic growth.

"While there are probably very prudent reasons that warrant liquidating Air Namibia, it will potentially leave Namibia without a local carrier capable of providing the international connectivity that the country's economy needs if it is to grow and flourish in the long term. Of course, there is nothing to prevent a new airline being established in Air Namibia's place," Burns commented.

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