Windhoek-Treasury has asked the Ministry of Works and Transport for Air Namibia to consider abandoning the direct route between Frankfurt, Germany and Windhoek in a bid to save money.
The route alone is said to bleed the national airline of N$30 million annually and comes with the additional financial risks of leasing a costly long-haul aircraft and associated expenses.
In fact, Treasury says Air Namibia had failed twice last year to honour the payment plans for the leasing of aircrafts used on the route, prompting government to chip in.
The request has, however, ruffled feathers at Air Namibia, whose management said the proposal was “dangerous for Namibia” and over-emphasised the cost of operations, while disregarding the overall benefits of employment and business across various economic sectors.
The national airline also claimed its financial risks are being exaggerated, saying its figures for the 10-month period ending 31 January 2017, compared to 2016, showed a reduction in losses of N$61 million on the Frankfurt route.
Air Namibia also says it has no hand in the financial obligations towards aircraft leasing, which were negotiated and handled by government attorneys for payment by government, and that its new business plan shows financial improvement on the route.
Finance Minister Calle Schlettwein yesterday confirmed to New Era that Treasury has made “a serious request” to the Works Ministry for the scrapping of Air Namibia’s direct route to Frankfurt.
“We had a look at the budget, at the perpetual huge subsidies given to Air Namibia, and looked at where those losses are. And most of the financial risks are associated with the Frankfurt route,” he said.
“Secondly, Air Namibia defaulted twice on the long lease aircraft and added costs last year. They didn’t have the money, in fact they were negligent not to pay… the financial risks for default are very serious,” Schlettwein noted.
Considering other pressing developmental programmes the Treasury is saddled with, the Finance Ministry then asked that the Frankfurt route be terminated, and the money saved on servicing the route used on other projects, he explained.
Schlettwein said Treasury was of the strong opinion that the increase in aircrafts and new airlines landings at Hosea Kutako International International Airport would continue to bring in the much-needed tourists and travellers in the absence of Air Namibia’s own flight route to Frankfurt.
It was on that basis, Schlettwein said, that Treasury asked the Works and Transport Ministry to investigate whether it is not better for Air Namibia to drop the Frankfurt route, which is more expensive, and concentrate on more profitable routes, “where we can be more efficient”.
“They have come back to us to say they are looking into it. As Treasury we have to look at how we spend money and there are so many pressing projects,” said the finance minister, who described the request to the Works Ministry as only “a request, but a serious request”, and not just for the sake of comparative studies.
Air Namibia’s spokesperson Paul Nakawa yesterday said though that the national airline was not aware of the proposal, but warned “it will be dangerous for Namibia to take a decision of that magnitude without taking all factors into consideration”.
Nakawa also said the cost of N$30 million the proposal envisages to save “is first of all based on old figures and does not take into account present and future improvements”. He said there have been a lot of developments on the Frankfurt route, aimed at reducing the losses incurred.
“Among them is the decision to increase the number of flights from six per week to seven per week since April 2017, with the prospect of increasing these flights even more in 2018 by virtue of the increased demand for flights to Namibia from Europe,” he said.
“The benefits of the recently signed Codeshare Agreement with Condor Airline will also go a long way in improving financial performance of the Frankfurt route.”
“One of the items contributing to the losses on the route is the high cost of the leases of the two airbus A330-200 aircraft used on the route. Air Namibia already started the process of engaging relevant stakeholders to re-structure these leases in order to reduce the cost.
“Our maintenance costs and agreements on these aircraft are also to be reviewed with the aim of reducing them to improve financial performance of the route,” said Nakawa.
Terminating the Frankfurt route would result in massive losses for many businesses across all sectors of the economy that may be forced to shut down, resulting in job losses, he opined.
“This will be counter to the Harambee Prosperity Plan on fighting poverty. We have many conservancies in the rural community whose livelihood will be negatively affected and the communities will suffer,” he said.