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Air Namibia plans to make its fortune by cutting costs, increasing income and building partnerships

Stewart Penney/WINDHOEK

A new managing director at Air Namibia is determined to reverse the carrier's flagging fortunes and prepare it for privatisation by aggressively attacking costs while increasing income and creating a series of alliances. The first, with South African Airways (SAA), is to start on 1 April.

Appointed in late 1998, Malaysian-born financier Dr Jaafar Ahmad is a former governor of the Bank of Namibia and has held positions with the International Monetary Fund, Negara Bank of Malaysia and family-owned textile and engineering companies. Despite his lack of aviation experience, Ahmad is confident he can improve the airline's performance.

"I look at Air Namibia as a business and from a financial point of view. It is purely a business venture, purely profitability, bottom line, turning around, and privatisation, "Ahmad says.

When Ahmad became acting managing director and the previous chief executive Andreas Guibeb was demoted to deputy managing director, control of Air Namibia was split from state holding company TransNamib. The Government then injected N$20 million ($3.7 million) into the airline.

Ahmad now has a rolling six-month contract and bullishly states: "If I don't perform by the review, then they can fire me." He declines to reveal, however, the specific goals by which his performance can be measured, describing them as "sensitive".

His ambitions for the airline call for Air Namibia to break even by the end of the next tax year - 31 March 2000 - but he warns: "There are no quick fixes, no miracles. It must be over the medium term." The end of the current tax year is too soon for significant progress because the "institutional arrangements are not yet made", he says. Privatisation, or at least a partial sell-off, will take a little longer. The Namibian Government signalled that such a move was possibly five years off when it made radical changes in the airline's top management late last year.

A cornerstone of Ahmad's action plan is to "cut deep'' into the carrier's costs. "I look at industry returns, at where the costs are, where essential costs are and where costs can be cut into. My mission is to ensure viability and move forward," he says.

Staff cuts may be inevitable. But, if they are necessary, he says: "We will take the least painful approach, perhaps relying on a recruitment ban rather than wholesale layoffs.''

Some Ahmad-inspired measures already are in place. He has started to restructure Air Namibia internally. The carrier is cutting back the number of flights it operates to its two European destinations, London and Frankfurt, and new long-haul aircraft have been secured.

As for the SAA alliance about to take hold, Ahmad anticipates Air Namibia's involvement will be a source of savings.

The two carriers signed a memorandum of understanding (MoU) in early January and, if all goes to plan, they will begin codesharing between Windhoek International Airport and Johannesburg at the start of April. The agreement is to be expanded to include Cape Town services, probably from October.

Ultimately, SAA regional carriers SA Airlink and SA Express and Air Namibia's as-yet-to-fly sister Kalahari Express Airlines (KEA) could be included in the codeshare arrangement. This potentially adds services from Windhoek's regionally oriented Eros Airport to South Africa. Eros is close to the city centre. The international airport is 40km (24 miles) from the capital city.

Partnerships on the horizon

KEA was created as a private carrier to compete against SAA and Air Namibia between Windhoek, Cape Town and Johannesburg. Its investors could not guarantee loans linked to the acquisition of two Fokker F28 twinjets. Eventually, the carrier was taken over by TransNamib and SA Airlink; the state holding company has now handed its KEA holding to Air Namibia.

Ahmad says Air Namibia and SAA will also co-operate on maintenance, accounting, reservations and training. When the MoU was signed, it was billed as a "long-term comprehensive commercial alliance", leading to speculation that SAA could become an equity investor in Air Namibia when it is finally privatised.

Ahmad hints that Air Namibia is looking for a third, European, partner. Past historic links and a modern presence of German interests in Namibia position two German-based airlines as possible partners.

There are ties already with LTU, the German leisure carrier partly owned by Swissair parent SAirGroup. German flag carrier Lufthansa has also been linked with Air Namibia, revealing in October last year that it was talking to TransNamib after the state holding company declared that Air Namibia had no future as a stand-alone airline. Germany, once the colonial power, is the largest outside investor and a large source of visitors.

Air Namibia's link with SAA spells the end of its relationship with Johannesburg-based Comair, a British Airways franchisee. The two carriers had a blocked space agreement on flights between their main bases.

Outside South Africa, Air Namibia's African network is restricted to the countries with which it has land borders: Angola, Botswana, Zambia and Zimbabwe. Victoria Falls is the best served by Air Namibia, but Harare, Luanda, Lusaka and Maun are less frequently visited.

But Air Namibia sales manager Shareen Tommasi predicts that the airline is likely to further its bonds with other flag carriers in southern Africa, saying: "We look to alliance partners in the region. We are only good if we work together, even if informally." She adds that the carrier has held informal talks with Air Botswana and Air Zimbabwe. Other conceivable partners include carriers from Malawi, Mozambique, Tanzania and Zambia. All are members of the Southern African Development Community along with Angola, Botswana, Namibia, South Africa and Zimbabwe.

It is already linked with TAAG Angola, with the two codesharing between Windhoek and Luanda. At one stage, Air Namibia was operating services from Luanda to Lisbon, Portugal, on behalf of the Angolan carrier.

Until the start of the Northern Hemisphere summer timetable in late March, Air Namibia will operate three times a week to Frankfurt and twice a week non-stop to London, with a third trip to London via Frankfurt. In April, however, the two direct London flights will be dropped to boost load factors on the airline's flights to an average 82-85%. Ahmad's hand was further forced by slot restrictions at Heathrow, coupled with a late application for slots.

Looking at the long haul

A benefit of the new service is that both flights will be overnight rather than the Windhoek-London service operating during daylight.

From the start of the Southern Hemisphere summer timetable in October, Air Namibia will have had six months of consolidation under its belt and will return to its thrice-weekly London services. Also under consideration is a fourth service in 2000 if Heathrow slots materialise.

After a long search, the carrier has selected new long-haul aircraft to replace a leased Boeing 767-300ER which Air Namibia has been operating since April last year when it replaced a Boeing 747SP. That aircraft was returned to owner SAA as maintenance costs were becoming a burden. Air Namibia is now, however, reverting to a 747SP lease.

Ahmad says the weakness of the Pratt & Whitney-powered 767 is its inability to lift large freight loads from Windhoek's international airport, which is 5,500ft (1,670m) above sea level with summer temperatures of 35¼C (95¼F) and above. He wants hold capacity because 300-350t of cargo, principally fish, is exported each week from Namibia, mainly on chartered freighters. Ahmad says the 767 can, in theory, carry 15t of freight, but is limited to an average 8-10t.

It is believed that SAA is leasing the 747SP to Air Namibia. Ahmad acknowledges that Air Namibia is too small to get the best aircraft deals, but adds: "Alliances then come in handy because of collective negotiations."

He says the 747SP is "excellent, even though it is 25 years old, as an interim". Ideally, Air Namibia would like a 747-400 'Combi' with its 240-passenger and 40t cargo capacity. Ahmad says: "It's a buyer's market. If [Air Namibia] had the cash it would buy [a 747-400 'Combi'] rather than lease [another type]."

The mainstay of Air Namibia's domestic, short-haul fleet is the Raytheon Beech 1900C: three are in service. The 19-seat twin turboprop has the ability to operate from unpaved strips, typical of Namibia's regional airports, and from Windhoek's city centre airport.

It also wet-leases an Air Botswana ATR 42 twin turboprop, used on services between Windhoek International Airport and the popular Victoria Falls. On thick trunk routes to Johannesburg and Cape Town in South Africa and Walvis Bay on the Namibian coast, the carrier uses a Boeing 737-200 and a wet-leased Boeing 727 (above). Ahmad says another 737 may be acquired to replace the 727.