Cash transfusion for airline

In a cabinet announcement, government admitted that Air Namibia had become a perennial loss maker prompting cabinet to hire an external consultant to look into the problems facing the state owned national airliner.

Government said that development partner, the European Union has agreed to fund the consultancy work, which is expected to commence this month and be completed by December.

Government also said that it had instructed the Auditor General to look into Air Namibia’s books and identify cost cutting measures for the operation.

“Air Namibia has continued to incur operational losses necessitating government budgetary subsidies over the years.

“Against this background and cognisant of the precarious situation in the international airline industry, cabinet resolved that an international airline expert be identified to conduct a review of the business at Air Namibia and propose a long term solution to the problems facing the airline company,” reads part of the cabinet resolution.

Air Namibia has failed over the years to shake off its financial shackles despite an undertaking that it would endeavour to ensure that its financial position would stabilise and that the airline would not continue to incur operational losses necessitating government handouts.

Officials say that part of the problems can be ascribed to the intense competition between airlines and the resultant low profit margins and the ever-increasing price of fuel.

“In the interim, while the study is being implemented, cabinet agreed to provide a guarantee to Air Namibia to enable it to secure funding from financial institutions of up to N$240 million to enable the company to continue its operations for the remaining part of the year,”reads the resolution.

This consultant is expected to look into the airliner’s needs assessment and determine the scope of passenger and cargo air transport service in either international, regional or domestic market which could guarantee a minimum net income for Air Namibia.

Government also said that the unnamed consultancy would also be expected to come up with a cost benefit analysis at the same time determining industry benchmarks and route profitability.

Government said it also wanted international expert opinion on specific key risks, issues and opportunities together with an analysis of their associated strategies, operational and financial implications and quantify the capital requirements.

Air Namibia, which currently operates two Airbus A340’s, three Boeing 737’s and three Beechcraft 1900’s, has been incuring losses during the past years and is estimated to have cost state coffers more than N$ 1,5 billion in subsidies alone.

October 2006
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