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Air Namibia board defends Challenge Air settlement

Summary

Air Namibia’s board of directors has defended its decision to settle debts with Challenge Airline, saying that this was better than dissolving the whole national airline which would among others leave 636 people unemployed.In a media statement availed …

Air Namibia’s board of directors has defended its decision to settle debts with Challenge Airline, saying that this was better than dissolving the whole national airline which would among others leave 636 people unemployed.

In a media statement availed to Nampa on Wednesday, the national airline said while the company is struggling financially and has no financial backing from government and stakeholders on the settlement agreement, liquidation would have been the worst option as it would have triggered disastrous consequences for Air Namibia, its employees and stakeholders including government.

Belgian Challenge Air filed for Air Namibia’s liquidation in October 2020 but recently reached an out of court settlement agreement where Air Namibia will pay Challenge Air 9.9 million Euro of which 5 million Euro must be paid by 18 February 2021. The agreement is not backed by the government.

“The board considered the fact that the outstanding debt owed to Challenge Air was significantly lower than the assets of the company. Even if the most valuable asset was attached, the company would still continue operating. If, however, had the company been liquidated, we would not be talking about Air Namibia,” the statement read.

It further noted that the liquidation of the airline would have led to Air Namibia defaulting on lease agreements which are guaranteed by shareholders, as insolvency constitutes a repudiatory breach of the lease agreements.

“It is worth mentioning that, indeed the airline sits with historical debts (dating back to as far back as 23 years) and those debts, that are Government guaranteed, need to be serviced whether the airline is liquidated or not,” the statement reads.

It further said the board is of the opinion that it is in the best interest of the airline and the shareholder to avoid liquidation and, therefore, the re-start plan that was presented to the shareholder should be implemented.

In the new re-start plan, the board plans to terminate all leasing contracts and only use their all paid-for fleet of six aircrafts to generate revenue without the burden of lease costs. They further plan to terminate flights to and from all non-profit making routes and renegotiate most of the existing contracts and agreements in order to have a lean and cost-effective airline.

Source: Nampa