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Air Namibia’s flawed business model results in significant unsustainable debts – official

Air Namibia’s flawed business model results in significant unsustainable debts – official

The national airline, Air Namibia has been operating with a flawed business model where out of the 19 routes the airline was operating in 2019, 15 were loss-making due to high structural and operating costs, an official said last week.

The Finance Minister and Chair of the Cabinet Committee on Treasury, Iipumbu Shiimi said this follows an analysis over the past months done by the government to understand the core reasons for the commercial failures.

“The highest loss-making route was the Frankfurt route where major losses were incurred due to high fixed costs and under-utilization. It also became clear that the combination of the types of aircraft, routes, high employee numbers, and other structural inefficiencies contributed to the financial distress of the company,” he said.

According to Shiimi, the new business plan was then costed and compared to the cost of liquidation.

“The cost of implementing the new business plan would amount to more than N$7 billion. If we factor in the negative effects of COVID 19, the amount is expected to be significantly higher,” he added.

Meanwhile, Shiimi said in 2019, the government approached all airlines currently operating in Namibia as well as those that intend to operate in Namibia to assess if there would be any appetite to attract a strategic partner or investment for Air Namibia.

“Regrettably, all of the airlines that were approached declined,” he added.

Meanwhile, a Namibian High Court case in which Air Namibia faced possible liquidation was settled out of court on Friday, 29 January, with the airline promising to pay the Belgian company Challenge Air millions it owes.

For the past 10 years, about N$8.4 billion dollars was spent to bail out the local airline, Shiimi concluded.


 

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