As government continues to spend millions to keep the national airline afloat, the financial performance thereof has raised questions such as whether keeping Air Namibia is justified and affordable in the long run.
The airline currently receives a monthly subsidy from government for key monthly expenditures, such as the leasing of planes. The airline’s monthly expenses are reported at approximately N$300 million, with the state providing about N$50 million of that. The airline has received over N$10 billion in government subsidies and bailouts since the country became independent in 1990.
At the moment Cabinet is divided over the future of the airline which continues to cost taxpayers millions. The transport minister is seemingly fully behind the airline, while the public enterprise and finance ministers want to see robust reforms within the airline.
Despite past failures and the fact that the country’s economy is teetering, the country’s transport minister Alfeus !Naruseb is adamant that Air Namibia is key for Namibia’s growth.
According to its website, Air Namibia operates a fleet of ten aircraft: two Airbus A330-200 for the international route, four Airbus A319-100 for regional routes and four Embraer ERJ 135 Embraer for domestic routes. Air Namibia owns two Airbus A319-100. Officials within the airline continue to argue that government should make funds available so that the airline can buy more planes, instead of leasing, to strengthen its balance sheet.
A 2015 study by the International Air Traffic Association(IATA) said Namibia could reap the benefits of liberalized African markets.
The International Air Transport Association (IATA) said more jobs could be generated and additional economic growth achieved in Namibia if intra-African markets were opened up to permit greater airline transport connectivity.
The report, undertaken for IATA by the experienced independent economic consultants InterVISTAS, found that Namibia stands to benefit from an additional 10,600 jobs and N$1,17 billion additional GDP per year if the country just were to implement the 1999 Yamoussoukro Decision to open Africa’s skies to African airlines.
Although the national airline continues to provide over 690 jobs, analysts say the airline needs to be run as a professional entity guided by a feasible and robust business model with little political interference.
But according to IATA, liberalisation would cause airfares to fall by between 25% and 37% in the 12 countries under review, making air travel more affordable to more people. In turn, this will help to stimulate an 81% increase in traffic flows between the 12 countries within two to three years.
In terms of passenger trips, this translates to an increase from the present 6.1 million passengers to 11.0 million passenger trips.
For Namibia alone, this would be a 92% increase with passenger movements swelling to 1,107,200 from 577,800 recorded in 2013. The bulk of this growth would be on the air services linking Namibia with Angola and South Africa.
With wide reforms being instituted within the SOE sector in Namibia, public entities will be expected to improve efficiency on operations and cut costs to become self-sufficient.
Namibia stands to lose nearly a billion dollars in revenue if Air Namibia ceases to exist as a national airline, according to Oxford Economics.
The losses, explained the consultants at Oxford Economics in May, can be as much as half of N$718 million that was Air Namibia’s indirect GDP contribution in 2015/16, as a result of supply chain activities linked to the airline’s procurement.
They forecast that Air Namibia’s contribution to GDP would be as high as N$1.7 billion by year 2020/21.
The contribution calculation was based on the direct wages and salaries that the national airline pays to its employees, and the N$1 billion that Air Namibia paid to domestic suppliers. It uses figures from the 2015/16 financial year.
Also, the absence of Air Namibia would also mean the economic contribution by other airlines operating in Namibia would only be confined to the purchase of fuel when they depart from the airport. The N$1 billion that Air Namibia spends on local suppliers would be gone. Air Namibia also spends an additional N$970 million on foreign suppliers.
In 2015/16 Air Namibia’s operations and aviation-related capital spending made a N$704 million contribution to the Namibian economy and sustained 4550 jobs” Mulheirn said. Elsewhere he stated that the airline cost the economy N$263 million, referring to its direct losses which had to be neutralised through state subsidy. During the same period, offsetting the subsidy, Air Namibia contributed N$316 million in tax revenue to the fiscus.
Public Enterprises Minister Leon Jooste this week said for a commercial public enterprise the profit motive may not necessarily be overriding and indicated that he agreed, with the Air Namibia board, to work together and relook the company’s business model.
The Minister feels that the financial status of the airline is not sustainable and indicated that the ministry is concerned about the company’s outlook in the global competitive space in which it operates.
“The national economic and social interest should also be considered in the company strategy, as compared to pure profit maximization,” he said.
Jooste says commercial enterprises, like Air Namibia, should not only make profit to sustain themselves but also to be able to re-invest in the company.
“Profits can be paid put as dividends to the State but also withheld to replace assets and invest back into the company to keep up with industry standards and global competition.
The State should only come into the picture possibly for major new projects that will strengthen and grow the company. The commercial companies are companies, not glorified subsidized entities,” he noted.