Gunship
17th Jan 2006, 16:54
My calculation (can be wrong is that 1 Rand = 1 Nam $... thus R86mil :E
AirNam borrows N$86m
LINDSAY DENTLINGER
AIR Namibia has secured loans of N$86 million from two commercial banks to carry its operations through to the end of this financial year. Government has agreed to act as guarantor for the loan.
"It's quasi-Government debt", Permanent Secretary of Finance Calle Schlettwein told The Namibian.
"They will never be able to repay the money".
The dismal financial performance of the national airline and the failure of a Cabinet-approved turnaround strategy, have put the airline back at square one - riddled with debt and unable to sustain its operations.
REMEDIAL MEASURES Air Namibia requested more time to provide information regarding the loans when approached by The Namibian on Friday.
Friday saw the start of what is likely to become a series of meetings with the Finance Ministry this year to discuss remedial measures.
Despite Finance Minister Saara Kuugongelwa-Amadhila telling Parliament last year that Air Namibia had to be left to take management decisions without interference, Government has been forced to step in to sort out the mess.
Schlettwein told The Namibian that the airline might once again be forced to look beyond Namibian borders for assistance, as it was clear that it was experiencing a "capacity gap".
GOVT GIVING UP "We have tried almost everything and it has not been successful.
We have to decide whether it is worth our while to try again," said Schlettwein.
Kuugongelwa-Amadhila approached Cabinet at its last session for 2005 to approve a guarantee for the loan - obtained in equal portions from Bank Windhoek and Standard Bank Namibia.
This is despite a Government injection of N$116 million into Air Namibia from the 2005/06 Budget.
By the end of this financial year, Government would have pumped N$1,5 billion into the loss-making airline in the last five years.
"Government will seriously have to weigh up the sustainability of the airline and that must be traded off against health and education needs," said Schlettwein.
"The level of Government funding (to date) is not sustainable and represents significant amounts of money.
That kind of money requires high-level decision-making."
Asked why Government agreed to the loan guarantee, Schlettwein said Government had no choice if it did not want to see the airline fold completely.
MAJOR RAMIFICATIONS "From the start we were not satisfied with the quality of the request (to turn to the private sector for assistance), but we were pressed into the situation to keep Air Namibia afloat or else they would stop services and that would have had major ramifications for the tourism sector," said Schlettwein.
According to Government's Medium Term Expenditure Framework (MTEF), it is expected to fling another N$33 million Air Namibia's way in each of the 2006/07 and 2007/08 financial years.
The warning bells that Air Namibia's financial situation was looking more precarious than usual were ringing again in the last quarter of 2005, when the Ministry of Finance scheduled a series of meetings with Air Namibia management to explain the situation.
High oil prices, low yields on its international flights and the under-utilisation of its cargo facilities were all cited as contributing to its low income.
UNDER-PRICING Although its international direct flights to Germany and more recently the United Kingdom have enjoyed good load factors of on average around 70 per cent, the airline has been under-pricing its tickets in an effort to compete with more established airlines travelling the same route.
In the last two years, since the airline began implementing a turnaround strategy, it has failed to make any progress in becoming sustainable, let alone profitable.
In Schlettwein's view, Air Namibia would have to rethink its management, reduce its overheads, dovetail its regional and international routes, improve efficiency and consider strategic alliances with other airlines to save costs and yield better returns.
Schlettwein said the volatility of the industry could not be overlooked in Air Namibia's case, but airlines such as British Airways and Quantas, which at one time had also experienced massive losses, had managed to turn things around.
"Air Namibia should be asking what they are doing wrong compared to other profitable airlines.
They are not the only ones making losses," said Schlettwein.
He said Government would have to seriously consider what it was prepared to spend on keeping the airline flying and stick to that price tag, if it was not possible for the airline to yield profits.
BEYOND SUSTAINABILITY Schlettwein said his Ministry was considering reducing the amount of money it was originally planning to give Air Namibia in the 2006/07 Budget, which comes up for Parliamentary approval in the next four months or so.
"Something has to be done to turn around the airline.
It is beyond sustainability at this point," said the Finance Permanent Secretary.
Last May, Kuugongelwa-Amadhila told the National Assembly during her budget speech that "reform efforts" at Air Namibia were yielding results.
She said then that the company had managed to reduce its operational loss significantly and that its turnaround measures had "great potential" to further improve its performance.
She said Government could expect that budgetary transfers to the airline would get smaller over the years until they were eventually phased out.
At the end of 2003, Air Namibia suffered operational losses of N$147, 8 million - a situation which worsened to N$163 million in 2004.
MANAGEMENT CHANGES No financial statements have been made public since then.
Air Namibia has also undergone regular management changes in recent years.
In 2002, Government opted to forgo foreign management of the airline in favour of local managers André Compion and Gernot Riedel, to oversee a turnaround plan for the airline.
This Cabinet-approved plan led to the sale of the Boeing 747-400 Combi in 2004, which had been identified as the airline's biggest operational loss.
At the end of 2004, Riedel was replaced by Kosmas Egumbo as the new Managing Director.
Compion resigned as Operations Manager last November and Riedel's contract as an advisor to Egumbo ended in December.
Air Namibia is yet to appoint a new operations manager.
Helois Hoabeb took up the post of Commercial Manager in December, when Air Namibia started leasing one of two Airbus 340-300 aircraft to fly its international routes, as a more cost-effective option.
Namibian ONLINE (http://www.namibian.com.na/2006/January/national/06FD36838A.html)
AirNam borrows N$86m
LINDSAY DENTLINGER
AIR Namibia has secured loans of N$86 million from two commercial banks to carry its operations through to the end of this financial year. Government has agreed to act as guarantor for the loan.
"It's quasi-Government debt", Permanent Secretary of Finance Calle Schlettwein told The Namibian.
"They will never be able to repay the money".
The dismal financial performance of the national airline and the failure of a Cabinet-approved turnaround strategy, have put the airline back at square one - riddled with debt and unable to sustain its operations.
REMEDIAL MEASURES Air Namibia requested more time to provide information regarding the loans when approached by The Namibian on Friday.
Friday saw the start of what is likely to become a series of meetings with the Finance Ministry this year to discuss remedial measures.
Despite Finance Minister Saara Kuugongelwa-Amadhila telling Parliament last year that Air Namibia had to be left to take management decisions without interference, Government has been forced to step in to sort out the mess.
Schlettwein told The Namibian that the airline might once again be forced to look beyond Namibian borders for assistance, as it was clear that it was experiencing a "capacity gap".
GOVT GIVING UP "We have tried almost everything and it has not been successful.
We have to decide whether it is worth our while to try again," said Schlettwein.
Kuugongelwa-Amadhila approached Cabinet at its last session for 2005 to approve a guarantee for the loan - obtained in equal portions from Bank Windhoek and Standard Bank Namibia.
This is despite a Government injection of N$116 million into Air Namibia from the 2005/06 Budget.
By the end of this financial year, Government would have pumped N$1,5 billion into the loss-making airline in the last five years.
"Government will seriously have to weigh up the sustainability of the airline and that must be traded off against health and education needs," said Schlettwein.
"The level of Government funding (to date) is not sustainable and represents significant amounts of money.
That kind of money requires high-level decision-making."
Asked why Government agreed to the loan guarantee, Schlettwein said Government had no choice if it did not want to see the airline fold completely.
MAJOR RAMIFICATIONS "From the start we were not satisfied with the quality of the request (to turn to the private sector for assistance), but we were pressed into the situation to keep Air Namibia afloat or else they would stop services and that would have had major ramifications for the tourism sector," said Schlettwein.
According to Government's Medium Term Expenditure Framework (MTEF), it is expected to fling another N$33 million Air Namibia's way in each of the 2006/07 and 2007/08 financial years.
The warning bells that Air Namibia's financial situation was looking more precarious than usual were ringing again in the last quarter of 2005, when the Ministry of Finance scheduled a series of meetings with Air Namibia management to explain the situation.
High oil prices, low yields on its international flights and the under-utilisation of its cargo facilities were all cited as contributing to its low income.
UNDER-PRICING Although its international direct flights to Germany and more recently the United Kingdom have enjoyed good load factors of on average around 70 per cent, the airline has been under-pricing its tickets in an effort to compete with more established airlines travelling the same route.
In the last two years, since the airline began implementing a turnaround strategy, it has failed to make any progress in becoming sustainable, let alone profitable.
In Schlettwein's view, Air Namibia would have to rethink its management, reduce its overheads, dovetail its regional and international routes, improve efficiency and consider strategic alliances with other airlines to save costs and yield better returns.
Schlettwein said the volatility of the industry could not be overlooked in Air Namibia's case, but airlines such as British Airways and Quantas, which at one time had also experienced massive losses, had managed to turn things around.
"Air Namibia should be asking what they are doing wrong compared to other profitable airlines.
They are not the only ones making losses," said Schlettwein.
He said Government would have to seriously consider what it was prepared to spend on keeping the airline flying and stick to that price tag, if it was not possible for the airline to yield profits.
BEYOND SUSTAINABILITY Schlettwein said his Ministry was considering reducing the amount of money it was originally planning to give Air Namibia in the 2006/07 Budget, which comes up for Parliamentary approval in the next four months or so.
"Something has to be done to turn around the airline.
It is beyond sustainability at this point," said the Finance Permanent Secretary.
Last May, Kuugongelwa-Amadhila told the National Assembly during her budget speech that "reform efforts" at Air Namibia were yielding results.
She said then that the company had managed to reduce its operational loss significantly and that its turnaround measures had "great potential" to further improve its performance.
She said Government could expect that budgetary transfers to the airline would get smaller over the years until they were eventually phased out.
At the end of 2003, Air Namibia suffered operational losses of N$147, 8 million - a situation which worsened to N$163 million in 2004.
MANAGEMENT CHANGES No financial statements have been made public since then.
Air Namibia has also undergone regular management changes in recent years.
In 2002, Government opted to forgo foreign management of the airline in favour of local managers André Compion and Gernot Riedel, to oversee a turnaround plan for the airline.
This Cabinet-approved plan led to the sale of the Boeing 747-400 Combi in 2004, which had been identified as the airline's biggest operational loss.
At the end of 2004, Riedel was replaced by Kosmas Egumbo as the new Managing Director.
Compion resigned as Operations Manager last November and Riedel's contract as an advisor to Egumbo ended in December.
Air Namibia is yet to appoint a new operations manager.
Helois Hoabeb took up the post of Commercial Manager in December, when Air Namibia started leasing one of two Airbus 340-300 aircraft to fly its international routes, as a more cost-effective option.
Namibian ONLINE (http://www.namibian.com.na/2006/January/national/06FD36838A.html)