Namibian government officials, including public enterprise minister Leon Jooste, have traveled to the United Stated to negotiate Air Namibia’s exit from aircraft lease agreement.
The closure of the national airline could cost the government around N$2,5 billion.
Jooste, along with officials from the transport ministry and the attorney general’s office, will meet the US company tomorrow.
Two months ago, Finance Minister Calle Schettwein submitted a memorandum to the Cabinet committee suggesting the closure of the airline.
The memorandum included the negotiation of exit lease agreements and transfer of the airline to public enterprises ministry.
In the document are detailed outlines on why the airline should be shut down.
The document shows in one of the estimates options that Air Namibia would need N$3,5 billion to continue operating in its current form for three years.
Another plan includes a board-supported bailout plan, and would cost between N$2,5 billion and N$3,3 billion.
The third option is a new business plan that would need N$4,1 billion, while the fourth is the total closure of the airline, an option recommended by Schlettwein.
“This scenario assumes liquidation of Air Namibia. The government liability of approximately N$2,5 billion under the remaining government guarantee for the lease agreement of the A330s will stand,” the Cabinet document said.
“The scenario is financially the most predictable [N$2,5 billion worse case] and therefore the preferred option,” the document said.
The airline has been unprofitable and over the years, Cabinet members have been divided on whether it should continue operating as a public entity, get privatised, or close down.
The document shows figures of N$8,3 billion that the government pumped into Air Namibia from 1999 to 2019.
Schlettwein, in the memorandum, said the airline’s historic debt is N$1,3 billion.
He also indicated that Air Namibia might not operate beyond 12 months.
“The company has considered approaching the market for external financing and borrowing against assets. However, this option is not feasible, given the consistent message in the past that banks refuse to advance financing in the absence of audited financial statements, aircraft is an asset class which cannot be converted into cash, and due to low confidence in management capability, given the historic challenges,” he said.
Schlettwein said the airline’s financial governance has been poor over the past years.
He said although the costs involved in the liquidation process might be steep, he believes that grounding the airline will lead to significant savings in the long term.
“It is clear that Air Namibia under the current model is unsustainable, and that key decisions have to be taken urgently at shareholder level regarding the future of Air Namibia,” Schlettwein said.
According to Jooste, this mission is in line with directives from the Cabinet committee on overall policy and priorities and the Cabinet committee on treasury.
“The decision was taken for me to lead this delegation for this purpose,” he said.
“If we can’t terminate the lease agreements on acceptable terms, Air Namibia will take up the process to enter into the actual negotiations with the owners as that then becomes an operational matter, where the shareholder will not be directly involved in.”
According to Jooste, the outcome of the US talks will give a more accurate indication of what options are available, and at what cost as far as the troubled airline’s future is concerned.
