Air Namibia board resigns over spat with gov't

Feb 04, 2021

The board of Air Namibia has resigned after launching a scathing attack on the Namibian government for “usurping its functions” and interfering in the management of the state-owned airline, making it “extremely difficult for the board to execute its fiduciary role” as it sought to save the airline from liquidation.

All four board members tendered their resignations to Public Enterprises Minister Leon Jooste on February 3 after earlier issuing a statement that revealed they were at loggerheads with the government over efforts to rescue the airline. Air Namibia spokesperson Twaku Kayofa said the airline was now awaiting guidance from the government on the way forward.

Clarifying its actions concerning a EUR9.9 million (USD24.2 million) out of court deal on January 28 that averted Air Namibia's liquidation, the board earlier underlined it had always acted in the best interest of the airline and the shareholder.

This followed after the Finance and Public Enterprises Ministries last week appeared blindsided by the 11th-hour settlement reached with the liquidator of defunct Belgian lessor Challengair, which, if it had failed, would have resulted in the liquidation of the flag carrier on January 29 over outstanding payments of a 1998 lease of a B767-300(ER). The government had decided not to oppose the court case, and thereby the possible liquidation, saying it could not afford to fund the airline's turnaround, nor had it found a strategic partner for the carrier.

The board reacted with all guns blazing, saying the relationship between the two parties had degenerated to the point where the Ministry of Public Enterprises:

  • directly engaged employees and trade unions, by-passing the board;
  • negotiated contracts involving the company without the knowledge of the board;
  • procured advisory services on behalf of the company;
  • initiated a restructuring exercise, without prior knowledge of the board;
  • managed the appropriated budget earmarked for the company without involving the board. The Namibian Parliament had approved NAD948 million Namibian dollars (USD63.7 million) in the 2020/2021 fiscal year for Air Namibia. Still, the board to date had not been briefed on how these funds were disbursed, if at all, other than a monthly allocation for salaries.

The board believed it was in the best interest of the airline and the shareholder to avoid liquidation and to implement the re-start plan, adding it had always been clear that Air Namibia would require a “significant capital injection from the shareholder”.

However, the impression created that it needed NAD7 billion (USD461.6 million) to restart operations was incorrect, as this figure included forward debts until 2025 that were not payable now.

Instead, the airline’s restart plan would result in a “leaner, competitive, and sustainable airline” following the termination of all aircraft leases and non-profit-making routes, and the re-negotiation of most contracts. The airline’s paid-for fleet of six aircraft could be used to generate revenue without the burden of lease costs. The restart would preserve at least 50% of 636 jobs, which would otherwise be lost.

The board revealed the Namibian government had not agreed to support the settlement deal with Challengair financially. “Late evening of January 28, 2021, the shareholder communicated that it would not avail funds for Air Namibia to settle with Challengair. It had also become clear at the time that the Ministry of Public Enterprises, as the second respondent, had also taken the decision not to defend the matter. The inevitable consequence was, in all likelihood, a liquidation with all its disastrous consequences. Faced with the real prospect of liquidation, Air Namibia engaged and reached a settlement with Challengair for the debt owed to the latter,” the board explained. “The board considered the fact that the outstanding debt owed to Challengair was significantly lower than the assets of the company and that even if the most valuable asset was attached, the company would still continue operating.”

“The company had no direct position from the shareholder on their views regarding liquidation,” the board revealed. “The shareholder was engaged, and their position was to leave the matter to the board, so long as the impression was not created that the settlement agreement would bind the shareholder. The board signed with the full understanding that the agreement had no guaranteed backing of the state, and there is no single mention of the government/state/Ministry of Public Enterprises in the agreement. It should also be noted that the window of opportunity to file for liquidation still remains open.”

With the first EUR5 million (USD6 million) instalment due on February 18, there was sufficient time to explore alternative funding, the board said. It believed the payment plan had secured a window in which the government could finalise ongoing efforts to save the airline.

The board said liquidation would trigger defaults under lease agreements guaranteed by the government, which in turn would nullify all future options the government was considering, as insolvency constituted a breach of lease agreements. It said historical debts dating back 23 years would also need to be serviced, whether the airline was liquidated or not.

 

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