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Saturday 19 January 2019
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Air Namibia gets second chance

After being in the dark when the four Embraer ERJ 135 (37-seater) aircrafts it leased from Air France subsidiary, HOP!, was seemingly sold to West Air Aviation, it now turns out that the French firm has made a U-turn.
The French firm towards the end of last month approached Air Namibia willing to negotiate the sale of the aircraft, The Patriot can confirm.
Official correspondences between Air Namibia and the French aviation firm highlight that Air Namibia can proceed and purchase the aircraft if it so wishes.
“I think you need to clarify the needs of Air Namibia and preferred solutions: return all or part of aircraft; if you want/ need to keep some aircraft, extend the leases or purchase,” said !Hop’s representative Francois De Bost in one of the documents.
If Air Namibia decides to return the aircraft, De Bost said !Hop is ready to discuss the conditions.
When approached for comment, West Air responded, “Thank you for your email, we have read through your questions. We have no comments at this time, other than to state that your sources are unreliable and speculative at best. We do not wish to get involved in any hearsay.”
The new developments come despite the fact that the French company and West Air already reached a sale agreement on 10 July 2017, according to sources close to the transaction, paid 50% of the transaction value.
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 Services is prepared to lease the same aircrafts to Air Namibia.
Documents also 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. That is 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 that 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 Services 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.

Airport upgrades
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 145 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 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. The purchase option will therefore cost the airline a total of N$156million.
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.
When approached for comment Air Namibia refused to comment and directed quiries to !Hop.
!Hop in the past made it clear that it is not willing to discuss the transaction.




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