Tossing around a hot potato

Since 1990, the government has availed over N$8 billion in bailout funds to Air Namibia, notwithstanding the fact that the national airline has not made any profit. By its own admission, the airline has struggled in the past with inefficient aircraft and unprofitable routes, while the bloated workforce has not helped its cause.

But it now clearly appears the government is unable to resuscitate these failings, although the only logical conclusion would have been to privatise the business. However, this route appears far-fetched at the moment.

“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,” finance minister Iipumbu Shiimi said last week.

According to Shiimi, the country’s economy can no longer afford to perpetually provide financial support to Air Namibia at the expense of supporting national economic growth and critical social services. The Air Namibia story is a sad one but inevitable at the same time.

Yes, while privatisation would help to reduce government spending and perhaps improve governance at the national airline as well as save the over 600 jobs, a re-start plan at this stage would be very difficult to implement given the situation the airline finds itself in.

Financials from a few months ago indicated that Air Namibia’s liabilities as at August 2020 totalled about N$3 billion compared to assets of N$981 million.

On top of this, it is on record that Air Namibia has been operating with a flawed business model where the majority of its routes were loss-making due to high structural and operating costs.

The high maintenance and leasing costs have also been problematic, exacerbated by the fact the national airline only owns six aircraft in its fleet, mostly used for regional and domestic routes.

The question, however, remains whether government is at this stage entertaining ideas of starting a new and financially viable airline that can perhaps offer a good network domestically and regionally.

The long-haul network has proven to be loss-making over the years and it will not make sense for a new airline to take up that challenge considering the massive competition at this stage.

Equally, the frustration around job losses is justified, but we should also look at the bigger picture and not allow our emotions to cloud our judgement. The truth of the matter is that all those suddenly showing interest in the affairs of Air Namibia have been rooting for its closure and labelling it a bottomless pit because of government bailouts over the years.

Officials, including trade unions, watched on with folded arms as management after management failed at restructuring Air Namibia so that it could operate viably. The painful decision taken to file for Air Namibia’s voluntary liquidation has been influenced by a combination of factors, while Cabinet also considered all other options at its disposal, including coming up with strategic alliances for it to continue operating.

However, at this stage it remains to be seen whether government will give in to pressure to abort plans to liquidate the airline or steam ahead with the liquidation. What is clear for now is that a reboot of some sort would come at an extremely high cost as well.