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Monday 21 January 2019
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Air Namibia’s plan hijacked

….as West Air takes over almost half of its fleet

Air Namibia’s domestic flight operations are hanging in the balance after it emerged that the biggest private aviation company in the country bought almost half its fleet, without the national carrier’s knowledge. West Air Aviation, the new owner of the aircraft, currently operates chartered flights and it is not known at this point in time if it is planning to introduce scheduled flights with its new fleet. Air Namibia currently operates four Embraer ERJ135 leased aircraft from Air France Regional. The lease agreement will lapse in February, April, May and June 2018 respectively.  The Patriot has learned of a well-crafted conspiracy, which allegedly includes cabinet ministers, aimed at deliberately ensuring that Air Namibia will remain depended on leasing aircrafts at exorbitant amounts instead of buying its own fleet, which is believed to be N$40 million cheaper than the leasing option. Preliminary evidence shows that at least two Cabinet ministers have had prior knowledge that Air Namibia was going to be disadvantaged or they were complicit in the questionable deal.  Air Namibia’s current troubles evolve around the leasing of four jets used for its domestic and regional routes, from the French aviation outfit HOP.  The national carrier has been leasing four Embraer 135 aircrafts for N$2.6 million monthly, for the last seven years.  As part of the agreement, when the lease expired last year, Air Namibia had the first right of refusal to purchase the four planes from the French company, but it opted to extend the lease period for another 12 months. The lease agreement states that: “The lessee shall have the option to purchase the Aircraft at each anniversary of the Delivery Date for the then fair market value of the Aircraft taking into account the unused lessee’s contributed Maintenance Reserves and Security Deposit, if such sum can be agreed between the parties.”

 
However, it has come to The Patriot’s attention that French aviation firm seemingly circumvented the agreement and opted to sell the aircrafts to another Namibian aviation company. It has been established that West Air Aviation is prepared to lease the same aircrafts to Air Namibia.  Documents seen by The Patriot indicate that should the ailing national carrier opt to buy the planes, it would cost them between N$19,5 million to N$26 million per aircraft. Meaning a hire purchase agreement for six planes will cost about N$198 million including interest.  While leasing the same aircrafts for the same period will cost N$234 million.  The Air Namibia management and its board was allegedly unaware of the fact that the French company had elbowed it out of the transaction and with its future now hanging in the balance, its partner rather opted to sell the leased planes to Wings Aviation Services.

 

Air Namibia allegedly found out about the transaction when West Air informed the national carrier that it now owned the four aircrafts. Sources close to the transaction said West Air Aviation has already paid half of the unknown purchase price and want to use Air Namibia to pay for the remaining amount and keep the parastatal locked into a leasing agreement with it, while it reaps the profits from the transaction. West Air Aviation will be leading the line next year when Air Namibia has to procure aircrafts for lease purposes due to provisions in the new procurement Act, which stipulates that Namibian companies should get first preference when government or state-owned entities are procuring goods or services before looking abroad. “Seeing that the Procurement Act requires companies to procure goods and services locally, West Air is first in line- in fact the only- possible supplier to meet Air Namibia’s aircraft needs,” said a source close to the transaction. The Patriot has learned that the transaction between West Air Aviation and the French Company could have been aimed at deliberately preventing Air Namibia from owning its own fleet.  Sources close to the transaction also pointed out that the transaction could have happened with the knowledge of State Owned Enterprises Minister Leon Jooste and Finance Minister Calle Schlettwein. The French company and WAS reached a sale agreement last week Friday and on Monday 10 July 2017WAS, according to sources close to the transaction, paid 50% of the transaction value.

 
Jooste was linked to the deal because he allegedly, this month, attended an air show at Paris’ Le Bourget Airport, without any Namibian aviation officials either from Namibia Civil Aviation Authority, Namibia Airports Company, government air transport services and Air Namibia.  Interestingly Jooste used a West Air Aviation flight to visit the air show while his trip coincided with the sale of the aircrafts to West Air Aviation. Although it is not clear what his alleged role is, in the transaction, Finance Minister Calle Schlettwein’s name has surfaced.  Sources close to the transaction said he had prior knowledge of the deal before Air Namibia knew of it. The finance minister did not respond to queries on the matter. Air Namibia’s spokesperson Paul Nakawa informed staff members about the sale of the aircrafts. In the communication to the staff members, Nakawa said: “Air Namibia was not consulted on the intended sale, and was unaware  of this until 12 July 2017.”  Nakawa told the staff members that management is busy attending to the matter. Joos Agenbach from Koep and Partners legal firm who represents West Air Aviation refused to answer any questions related to the deal citing client confidentiality.  The Patriot understands that Air Namibia was planning to buy the aircrafts when the lease agreement expires next year.

 
Sensitive documents seen by The Patriot show that the national carrier was busy with plans to  purchase two ERJ 135 and four ERJ 145 aircraft as the replacement of current aircraft leases for the domestic market and some regional routes, pending board approval. If Air Namibia were to acquire ERJ145 planes, it would need to convince Namibia Airports Company to upgrade the local airports. The ERJ 140 and ERJ 135 aircraft both will require at least a Category 6 Fire Fighting Category Airport. The ERJ 135 aircraft, which is what we currently operate on the domestic market, can do with a Category 5 Fire Fighting Category Airport; with a flexibility to operate on Category 4 Airports where frequencies are below the 700 threshold. Any other operations to an airport below Category 5 will result in a regulatory non-compliance.  The categorizations of Namibia’s domestic airports as issued by the Namibia Airports Company indicates that only Hosea Kutako International Airport and Walvis Bay Airport are above Category 5, with the remaining six (6) airports  being categorized below Category 5. “We are thus, operating on a thin margin of compliance on some of the domestic airport with the ERJ 135 aircraft,” said the airline’s commercial division. The team added that: “From our previous engagement with the Namibia Airport Company (NAC), their strategic objectives do not appear to include the upgrading of any of the six (6) airports to Category 6 or above in the near future.  This remains a limiting factor as far as Air Namibia’s ambitions to upgrade to bigger capacity aircraft on the domestic market are concerned.”

Lease or purchase
If Air Namibia opts to continue leasing, it will  lease six ERJ aircraft (2 x ERJ 135 and 4 x ERJ 145) from the current lessors or look for similar aircraft from other potential lessors, states the document. It states further that: “If for instance the airline manages to get aircraft to lease at indicative monthly lease amounts of USD 50 000, the monthly total payment for the six aircraft will be N$3.9 million.  The annual cost for leasing the six aircraft is N$46.8 million and if the aircraft are leased for five years the total contract amount will be N$234 million at current exchange rates.” But if it opts to buy, the committee says the airline will purchase “good second hand 2 x ERJ 135s and 4 x 145s aircraft from the market.” “Indications are that the aircraft are available in the market at prices ranging from N$19.5 million to N$26 million.  Furthermore, if the airline borrows the N$156 million from the market to finance the aircraft purchase over a five year repayment period, the approximate interest cost will be N$41.7 million.




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