Windhoek extends $166million lifeline to Air Namibia

 

Air Namibia is to be bailed out by the Namibian government to the tune of NAD1.8billion (USD165.8million) Finance Minister Saara Kuugongelwa-Amadhila has said. Responding to questions on the country's 2014/15 to 2016/17 Medium-Term Expenditure Framework (MTEF) in the Namibian parliament last week, Kuugongelwa-Amadhila said the funds would be used for the updating of the airline's business plan and payment of outstanding debt.

The motion drew criticism from the Minister of Defence, Nahas Angula, who argued that such heavy capitalization is a burden to the fiscus which, he said, should be focusing more on developing local industry. “I was talking about Air Namibia in relation to Epangelo Mining [state-owned mining company]. We Namibians have no capital, expertise or technology to run a mine. Government has resources so it can enter into partnerships. So I was saying it would be better if the resources given to Air Namibia could have been given to Epangelo,” he said.

In response to the criticism, Air Namibia's spokesman Paul Nakawa said state funding was only temporary and that according to their projections, the airline would be viable in four years time. “We are very well in compliance with the turnaround strategy (plan) and we are optimistic that it should be self-sustainable in year five. As we have been saying on many occasions, the new business plan is aiming to turn Air Namibia’s small size into a virtue by competing smartly and swiftly, and by so doing we will ensure that we are decreasing our dependency on the shareholder. This involves a coordinated commercial strategy, bringing together local market intelligence, competitor analysis, pricing, revenue management and sales," Nakawa said.

Namibia's NewEra newspaper says the airline received NAD472.2million in state funding for the current financial year, down from NAD1.132billion the previous financial year. In the future, Air Namibia is to receive NAD579.8million for 2015/16, and NAD760million for 2016/17.

 

Source: ch-aviation

Struggling South African Airlines begs for bailout

 

Fighting a low rand and high fuel costs with its ninth turnaround plan in 13 years, South African Airways urgently needs a cash injection. South African Airways' (SAA) executives are caught between their continental ambition and lack of cash. Technically insolvent, SAA is reliant on a R5bn ($443m) government guarantee to operate while discussions about a cash injection continue with the treasury. The size of the bailout required has not been disclosed, but an announcement is expected at the end of March.

 

Monwabisi Kalawe, who took over as chief executive in June 2013 following a purge of board members and executives in the latter half of 2012, says the board is investigating several countries in West Africa as a potential host as it tries to compete with Middle Eastern carriers. "They have been successful in absorbing air traffic to the Middle East and then distributing it. This is a risk for an airline situated at the bottom of Africa. Setting up a hub in West Africa is our attempt to mitigate that risk," Kalawe says. SAA has shortlisted Nigeria, Ghana and Senegal for its hub. It expects it will take a year or longer to finalise negotiations, but this will require an additional capital injection from the treasury.

 

Smoother Transit:

 

SAA is also lobbying to scrap transit visas, which would make Johannesburg more attractive to passengers travelling to other parts of the continent. "What we want to see is SAA being the flight of choice on the continent," Kalawe says. Most pressing, however, is stabilising SAA's finances. Its results for the financial year ended March 2013 were delayed by five months as talks continued over the bailout. Despite passenger numbers growing by 8% and the savings realised as a result of its 'Gaining Altitude' turnaround strategy, a 13% decline in the rand against the United States dollar contributed about R700m to its after-tax loss of R1.2bn.

 

The rand has declined by more than 30% since then, raising fears about the losses it will suffer in the current financial year. "The impact of the weakening rand is severe," says Wolf Meyer, SAA's chief financial officer. Increasing its technical operations on the continent will grow dollar-based revenue and act as a natural hedge, Meyer explains. Even without the challenge of a weakening rand, turning around the airline and reaching the break-even point by 2017/2018, as envisioned by the turnaround plan, will be no easy feat. Gaining Altitude is the ninth turnaround plan in 13 years. The company has not made detailed targets from the latest plan public, so it is impossible to gauge whether the plan is working.

 

Fuel Cost  Imperative:

 

Political interference has been rife. Crucial to the plan is upgrading the fleet to more fuel-efficient planes, yet public enterprises minister Malusi Gigaba forced the board to withdraw a July 2013 request for proposals for 23 new wide-body, long-haul planes. Gigaba said it lacked "crucial elements of industrialisation and localisation, which are vital to South Africa's policies". New planes will cut SAA's fuel costs, which are currently 35% of operating expenses.

 

Considering not a single SAA long-haul route is profitable and that plane purchases typically have a lead time of five years, finalising the contract speedily is of great importance. There is no date for finalising the new request. "We are grappling with this new requirement for industrialisation and benefiting South Africa," Kalawe explains. Gigaba also instructed the board that no job cuts will be allowed as part of SAA's plans, as the "social and political cost is very high".

Source: theafricanreport