Only four out of eleven Air Namibia flying routes have recorded positive operating margins during April 2018 and December 2018 and all three fleet types are operating at a loss. These details were presented to the airlines executive committee in a 12-page Route Profitability Report by the Commercial Services General Manager, Xavier Masule.
“The submission presents to the Board of Directors, an overview of the airline’s route profitability for the period April 2018 to December 2018 compared to the same period last year,” Masule said in the report presented on 19 February 2019.
The report stated that Air Namibia “remains loss making with -32% operating profit margin at profit contribution two level”, the profit margin was -34% over the same period during the previous year.
The airline’s loss-making was despite them recording a 12% revenue improvement from N$1,1 billion during the period April to December 2017 to N$1,3 billion during the period April to December 2018. While Masule in his report also recorded an increase in passenger numbers by 13%, the airline recorded that the average revenue per passenger “remained flat at N$2, 620”.
The profit contribution two level is calculated at route operating revenue less direct variable operating costs, less direct fixed operating cost, the report stated.
All three fleets operating at a minus
The Commercial Services Manager furthermore presented to Exco that out of their three fleet types, only one fleet type is making a profit. The three fleet types include the Airbus A330-200 fleet which is primarily used on the Windhoek-Frankfurt route and occasionally used on the Windhoek-Johannesburg route, in the event there is a shortage in the fleet that normally services that route due to maintenance.
This is also the route that is caught up in the ongoing legal action between the liquidated European airline Challenge Air and Air Namibia over a decade-old judgement debt.
The Patriot on previous occasions reported that millions of dollars is being removed from the Air Namibia bank accounts in Europe due to the judgement debt.
Just yesterday, N$ 112 563, 649.80 was seized via CommerzBank in Germany as part of the German court ruling made in favour of Challenge Air handed down on 12 January 2015.
The report did not make any mention of the funds being lost as a result of the current judgment debt that is being executed.
The report further recorded that the A330-200 fleet is loss-making and that its operation accounted for 78% of the airline’s loss during April to December 2018 period.
“The Airbus A330 fleet represents a substantial portion of the airline’s financial results in terms of revenues and costs,” the report read.
They recorded that the fleet’s loss deteriorated by -10% percentage point from -38% operating margin in 2017 to -48% operating margin in 2018, despite a revenue increase by N$23,9 million.
The increase was as a result of a 6.5% increase in average fare passenger.
With the increase in revenue also came a N$95 million operating costs in the period under review as a result of fuel price increase.
“During the previous year (2017), crude oil price which correlates with Jet Fuel price, traded at averages of US$ 45 (N$641) to US$50 (N$712) per barrel, while the current year this has risen to US$70 (N$997) to US$ 80 (N$1140) levels,” the report reads.
The other fleet, Airbus A319-100, which is primarily used on regional routes to Johannesburg, Cape Town, Luanda, Lagos and Accra is also operating at a loss, the report stated.
This fleet, according to the report, accounted for 21% of the airline’s losses during the April-December 2018 period. This operating loss, the airline said, is better than a -35% operational loss that was recorded the previous year.
“This fleet was previously used on the Gaborone-Durban route, and was removed in June 2018 when it was deployed on the Lagos–Accra operation.
The A319 fleet was too big for the Gaborone-Durban route hence it was removed,” the reported states.
The third fleet, Embraer ERJ 135, is used on domestic routes, one of three Windhoek-Cape Town daily rotations, Johannesburg-Walvis Bay routes as well as the Lusaka, Harare, Gaborone, Durban and Victoria Falls.
While the report does not state that the fleet is loss making as it did with the previous two fleets, it recorded that it achieved a -1% profit margin during the period under review, which is a betterment from a -17% profit margin in 2017.
“Revenue is higher than last year by N$18,4 million, while direct operating costs reduced by N$8,6 million,” the report says.
The report stated that the contributing factors to this improvement include the increased utilisation, deployment to Gaborone-Durban route and a third Cape Town rotation as well as a renegotiation in the lease rates of the fleet from US$55 000 (N$784 025) to US$45 000 (N$641 475) per aircraft per month.
Dividing the route performances into profitable, loss making with improved results and loss making, the airline identified that the Ondangwa, Victoria Falls, Harare and Gaborone-Durban routes are profitable routes with the Ondangwa route attaining the highest margin at 21% – a one percentage point increase from the previous year and a 4.8% growth over 2017.
“This (Ondangwa) is a star route, posting positive margins from ever since the Embraer fleet was introduced and has potential for growth when capacity increases,” the report reads.
The Gaborone-Durban route recorded the second highest margin at 17%, followed by the Victoria Falls route at 16% which was a three percentage point drop from the previous year.
Harare recorded an 8% margin which grew from a -53% margin the previous year.
The loss making, with improved results routes are the Lusaka, Rundu, Katima, Johannesburg and Windhoek-Walvis Bay-Cape Town routes. The Johannesburg route made the best improvement with an 80% improvement from -52% operating margin to -10% profit margin.
The loss making routes were listed as the Frankfurt, Lagos/Accra, Luanda, Luderitz/Orangemund, Ondangwa-Walvis Bay and Johannesburg routes.
The Frankfurt route recorded a loss of N$317 million during April to December 2018 which is a 29% increase in the N$245 million increase during the same months in 2017.
Masule noted in the report that the airline should ideally have also compared figures to the budget for the corresponding period, but could not do so as the current annual budget is not available on a monthly basis.
He also pointed out that their administration costs were also not available for this report as the “updated accounting records still lagging behind”. Aviation experts have reliably contradicted this claim by Air Namibia by stating that the “exclusion of overheads and Admin costs is unacceptable and intended to mislead.”
Also noteworthy, the expert claims is the exclusion of the “myriad of legal cases that the airline has gotten itself into over the past few years which was omitted to create an impression that the calamity is smaller than in reality.”
The Patriot newspaper recently reported that the Minister of Finance said Air Namibia is insolvent and that its financial woes is as a result of poor management.
The Patriot also understands that the airline has been struggling to comfortably fuel its planes.
Meanwhile, the European accounts continue to have funds withdrawn from, due to the judgement debt against the national airline.