Airlines

Air Namibia Grounded As It Faces Liquidation

After three troubling years and millions spoon-fed into Namibia’s national carrier, Air Namibia will be liquidated according to the country’s Minister of Finance Lipumbu Shiimi.

Air Namibia has been in trouble for the past three years, but its fall from grace was reinforced when the Cabinet was briefed that last year’s decision to liquidate the airline will prevail.

Ministers have reportedly been debating on whether the Cabinet should stick to the liquidation decision.

“The answer to that is that liquidation still stands,” a source familiar with the Cabinet discussion said.

Minister of Finance Lipumbu Shiimi said the Cabinet has decided it is in the best interest of the country to file for voluntary liquidation as Air Namibia has not been profitable since its inception.

Speaking at a press conference, Shiimi said the government spent billions of dollars to support Air Namibia, but cannot keep sustaining it at the expense of other pertinent issues, such as economic growth and social services.

“It must be noted that the government considered all other options . . ,” he said.

Shiimi said the liquidation of Air Namibia would cost N$2 billion.

He said liquidation costs are not always the responsibility of the shareholder, but funds may be generated by selling the company’s assets.

Air Namibia’s assets at book value stood at N$981 million as at August 2020, while the airline’s liabilities stood at N$3 billion over the review period.

Shiimi said the government has committed to paying employees’ salaries for 12 months.

It will also consult the temporary board on the winding up of operations.

“That includes the schedule of payments to the employees and the protection of assets,” Shiimi said.

Shiimi denied information that the government wants to close Air Namibia to advance another airline.

He said: “This information is totally misleading and devoid of any truth. The history of Air Namibia is well known and the government can no longer carry this burden, given Air Namibia’s soaring debts.”

Minister of public enterprises Leon Jooste said the government explored various options to avoid liquidation, but all options proved to be futile.

He said the government has to date spent N$11 billion on the struggling airline.

Jooste corroborated Shiimi’s sentiments on the government not promoting the growth of another airline, but said the liquidation decision was already in the pipeline.

“The discussions that we have had leading up to the conclusion we have reached, were done quite a considerable time ago already. So, there were obviously a number of issues that needed to be resolved. One of them had been a very complicated issue of the lease agreements we have on the two Airbus aircraft, and the fact that they are fully backed by a government guarantee,” Jooste said.

One of the issues Jooste mentioned was the fact that Air Namibia was losing more money when operational than when operations ceased.

He said the airline lost N$111 million monthly during the Covid-19-imposed lockdown, compared to N$119 million monthly when operating.

“They were actually losing less than when they were operating because the business model is so flawed. When the minister says all options were explored, we mean all options,” Jooste said.

Rally for Democracy and Progress leader Mike Kavekotora says he supports the decision by the Cabinet to liquidate and close down Air Namibia.

Kavekotora is one of the members of parliament who have been calling for the closing down of parastatals that have been “technically insolvent for years”.

“We don’t need to be emotional about it. We currently have an airline which is basically a bottomless pit. It has been a liability. The money we have been pumping into Air Namibia as a nation went into billions and billions of dollars. This is money that could have been used for other pertinent issues such as education and health,” Kavekotora said.

“I only hope that the decision to liquidate Air Namibia is not politically motivated to the benefit of the politically connected people as we have been hearing in the papers,” he said.

Kavekotora said he does not support the narrative of maintaining a national airline for the sake of it.

“I am not buying into that argument of just wanting to see the Namibian flag on an airline. That is nonsense … If something does not work, you just have to kill it. And this applies to many technically insolvent state-owned enterprises,” he said.

Institute for Public Policy Research director Graham Hopwood also supports the Cabinet’s decision.

He said: “Air Namibia has not produced any audited financial statements over the years. You can’t run a business like that and expect it to continue … it is very sad, but it is inevitable that it has to happen.”

Popular Democratic Movement parliamentarian Nico Smit says although the decision has far-reaching effects on its more than 600 employees and their beneficiaries it was the right decision, since the airline has been running at a loss.

“It is a difficult situation but it all comes down to the mismanagement of Air Namibia from day one. If the business is not making profit, it is very unwise to continue with it,” he said.

A former minister of works and transport, Helmut Angula, described the planned liquidation as “horrible news”.

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