Airlines fly through a storm

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Windhoek – The voluntary liquidation of Air Namibia by authorities in Windhoek are a microcosm of the viability challenges facing by public funded airlines in the Southern African region.

And it is not just a Southern African problem.

The global airline industry has been in turbulence, some of which predates the crisis triggered by new coronavirus-related lockdowns that have cost carriers across the world billions over the past year.

South African Airways (SAA) recently received a N$10,5 billion shot in the arm from tax payers in the latest attempt to turn the carrier’s fortunes around.

The government in Harare, on its part, has for years been trying to restructure Air Zimbabwe’s debt.

In Namibia, Finance Minister Ipumbu Shiimi, Minister of State Owned Enterprises Leon Jooste, and the National Planning Commission this week announced the decision to wind down Air Namibia’s operations.

Unions are up in arms over the decision and are lobbying the government hard to find a way to save hundreds of jobs.

Minister Shiimi said a cabinet committee on Air Namibia had looked at various options to save the national carrier, but concluded that financial redemption was simply not on the cards.

Air Namibia has received about US$550 million in financial bailout packages since 1990, and a succession of CEOs and management teams have tried in vain to stop the airline’s financial haemorrhaging.

“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 is, therefore, with that consideration that the government took a decision to file for the voluntary liquidation of Air Namibia. It must be noted that the government considered all other options which included engagement with other airlines for potential investment/partnership, various business plans to turnaround the company,” Minister Shiimi said.

He went on: “It is, therefore, important for the nation to understand that the current debt of Air Namibia is unsustainable and will jeopardise the economic recovery plan that the government is currently seized with. The government believes that the decision taken is in the long-term interest of the country, taking into consideration the loss making history of the national airline.”

Minister Jooste weighed in saying Air Namibia was unsustainable as a business and could not perennially rely on taxpayer bailouts.

“We have considered all options at our disposal but the airline does not have a bankable turnaround strategy that will change its fortunes and unfortunately we have to settle for the liquidation,” he said.

As already noted, the turbulence is not affecting Air Namibia only.

SAA, the biggest carrier in Southern Africa and one of the largest on the continent, is in a deep hole and huge bailouts have done little to nothing to get the airline on an even keel.

The airline has been unprofitable for almost a decade, surviving on public money and government debt guarantees. It was placed under administration a year ago, prompting Finance Minister Tito Mboweni to fund a revival plan that includes firing almost 80 percent of SAA’s workforce. The plan cost about R10,5 billion.

South Africa’s Deputy President David Mabuza justified the decision to extend billions to save the airline, telling lawmakers that SAA remained a critical economic pillar.

“On the matter of government funding of the South African Airways, we must clarify upfront that the delivery of social and other services, and investing in the country’s state-owned enterprises as crucial drivers for development, should not be seen as mutually exclusive,” he said.

“On the contrary, funding of SAA should be understood in line with preserving strategic and catalytic state instruments for transformation, growth, development, service delivery and employment creation.”

Deputy President Mabuza said that cabinet approved the financial package, “we considered obligations of the state especially if the airline were to be liquidated”.

Elsewhere in the region, Air Zimbabwe laid off 200 employees – about half the workforce – in 2017.

But its biggest challenges remain a debt estimated in the region of US$300 million, a small and ageing fleet, and the loss of highly skilled personnel to bigger carriers, particularly in the Middle East.

 

International Air Transport Association (IATA) Director-General Mr Alexander de Juniac recently said the aviation industry had lost between US$70 billion and US$80 billion to COVID-19, and called for governments to support airlines to ride out the storm.

Mr de Juniac added, “Research has shown that there is minimum spread of the pandemic through travelling if there is improved testing and tracing of visitors before the trips. It is important that we work with governments in Africa and the world to introduce an application that would make it easy to track the movement of the people.”

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