Africa: Windhoek pledges to intervene in Air Namibia’s funding woes
Namibia’s Minister of Public Enterprises, Leon Jooste, says government is preparing to act in the matter between Air Namibia and the Namibia Airports Company (NAC).
Last week, NAC informed Air Namibia that it will not renew the national carrier’s groundhandling concession at Windhoek Int’l Hosea Kutako International Airport citing non-compliance with a number of clauses in their agreement.
In a letter dated May 22, 2019, and seen by New Era newspaper, NAC’s newly appointed Chief Executive Officer, Bisey Uirab, gave Air Namibia until the end of November to wrap its groundhandling operations at the airport.”
“Noting that the agreement expired on October 31, 2018, NAC is issuing Air Namibia (Pty) Ltd with a six-month notice effective from June 1, 2019 up until November 30, 2019, which is reasonable enough to vacate and cease your operations as a ground handler at HKIA,” he said.
According to the letter, the NAC cited the violation of clauses 4, 4.1, 5, and 10.2 of the agreement. Clause 4.1 specifically deals with payment of a consideration fee which NAC said Air Namibia has not complied with. “As such, your account constantly reflects arrears over the years,” Uirab said adding that NAC will soon float a tender for the requisite services.
Speaking at a press conference last week in Windhoek, Jooste said the government had noted the high level of debt between Air Namibia and the NAC, adding that the state would act in the best interest of both entities without giving preferential treatment to either one. He said government would assist Air Namibia with its unpaid debt.
As previously reported, Air Namibia’s has been experiencing severe cashflow problems as a result of an unresolved EUR25 million (USD28.3 million) claim filed by the liquidator of defunct Belgian carrier Challengair (1I, Brussels National). Aside from its NAC debt, Air Namibia has also had to seek government assistance to settle debts with MRO providers in Cyprus and South Africa. Said providers have refused to relinquish three A319-100s of which V5-ANK (msn 3586) has been in Larnaca, Cyprus since January this year while V5-ANN (msn 5400) and V5-ANM (msn 5366) have been stuck at Johannesburg O.R. Tambo since March 24 and June 2 respectively. As it stands, Air Namibia has only a single narrowbody jet active at present, V5-ANL (msn 3346).
“We have allocated funding to fulfil all of those requirements (unpaid debts). The aircraft[sic] should become operational very soon. It is a concern for us at the moment because they are losing revenue on three of the four A319 Airbuses, which is a big gap in their revenue stream,” Jooste said.
Aside from the Challengair claim, Air Namibia’s own business model has been called into question, especially the lease of two A330-200s from Castlelake.
During last week’s press conference, Jooste singled out the widebody contracts as a particularly heavy burden to the airline given they are denominated in US Dollars. The Afrikaans daily Republikein cited company sources as saying the jets cost Air Namibia between NAD50-60 million Namibian dollars (USD3.37-4.04 million) in fees every month.
“Air Namibia has only reached the halfway mark of the agreement and there is no release clause,” he said.
The two jets are primarily restricted to Air Namibia’s only longhaul route, the loss-making Windhoek Int’l-Frankfurt Int’l, Germany route, although with the A319s’ absence, they have also been deployed on trunk flights to Cape Town and Johannesburg O.R. Tambo.
“We need to find alternative routes for these planes, but the feasibility studies for this do not look rosy either,” the minister added.
Jooste said the Ministry of Finance had now allocated funding to secure Air Namibia’s A319 fleet adding that a full review of its business model had recently been completed and submitted to Cabinet for approval. He said the full report would only be made public once the second part of a contract with the consultancy had been completed.
“The first report gave us a clear picture and a good understanding of what needs to be done for Air Namibia going forward and it has quantified it too. The consultants were appointed for two purposes, the first being to propose different business models for Air Namibia and based on the outcome of that first phase, we have to interrogate them and decide what we feel most comfortable with,” he explained.
Air Namibia has become an increasingly costly project for the government in recent years despite previous intentions to restructure the airline and turn it into a self-sustaining venture. However, that effort has proven fruitless given the government’s decision to throw open Namibian skies to foreign competition with the likes of Ethiopian Airlines, KLM Royal Dutch Airlines, Qatar Airways, Condor, Eurowings, and South African Airways now controlling 70% of Namibia’s 14,045 weekly international seats.
According to a 2018 budget breakdown, Air Namibia was allocated NAD695 million in the 2016/17 budget year, NAD486 million in the 2017/18 financial year, NAD493.9 million in 2018/19, and NAD497.7 million in the 2019/20 fiscal year.