Jaafar Ahmad freely admits that his first reaction when asked to head up struggling carrier Air Namibia was: "What did I do wrong this time?" The job is certainly not one of the easiest. Ahmad was shipped over from Malaysia to revive the fortunes of the flagging carrier which even the head of Namibia's Federation of Tourism Associations describes as "a liability to the country's travel industry".
Ahmad, a Malaysian-born financier, says he "hadn't even heard of Namibia" before he was appointed Air Namibia's acting managing director and chief executive on a renewable six-month contract last November. He was asked to restructure and recapitalise the national carrier as a state-owned company with a view to its privatisation. The government removed Air Namibia from the control of state holding company TransNamib with the eventual aim of dissolving it into two partially privatised transport companies, Air Namibia and Namrail.
TransNamib described the carrier's financial position as "precarious" and damaging to its operation. In response, the government demoted managing director Andreas Guibeb to deputy managing director and injected N$20 million ($3.5 million) into the beleaguered carrier.
After a couple of months in Namibia, Ahmad's overriding impression of the country is that "if a pin drops, you can hear it". But silence is not something the managing director needs right now - Ahmad has to make a lot of noise if he is going to get the airline into shape.
It is not as if Ahmad has previous airline experience to fall back on - his most recent positions include heading the Namibian state bank and textiles and engineering companies in Malaysia. But he does not view a grounding in the industry as a prerequisite for running an airline.
"I look at Air Namibia as a business and from a financial point of view," he says. "What matters is dollars and cents."
No quick fix
Ahmad's aim is for Air Namibia to achieve break-even by the end of the next financial year, in March 2000. But he admits he is no miracle worker. "There's no quick fix to this - we need to look at the medium to longhaul view," he says. But for now, the indications are "that we can do it".
Ahmad will use a three-pronged attack to reach his goal of break-even. "We need to move, we need to cut and we need to add," he says. The managing director will first apply his business mind to improving the airline's operations, revenue generation, structure, need for new aircraft and expenditure levels.
As part of Air Namibia's cost-cutting measures, Ahmad is considering reducing the number of services between its hub at Namibian capital Windhoek and its two European destinations, Frankfurt and London. The airline operates three times a week to Frankfurt and twice to London, including one service via Frankfurt. Reducing the number of weekly European services from five to three would boost load factors to 85%, says Ahmad. He also wants the Namibia-London service to operate overnight, instead of during the day, to improve connections.
Further heavy cost-cutting lies ahead. "I need to cut deep for the first time - this part is the more sensitive, emotional and difficult to achieve," says Ahmad. He is guarded on precise cost-cutting targets but says he will refer to industry norms to see where and how expenditure can be consolidated and reduced. "The vision and mission I see here is to ensure the viability of the company and move forwards from there."
The airline will undergo internal departmental reorganisation but Ahmad will not speculate whether he will lay off staff as part of the restructuring process. "I will have to look at this but it's a sensitive issue. Everyone has to make sacrifices. I can freeze recruitment levels if I want to."
Open policy
The airline aims to privatise within five years, once its restructuring is complete. But much preparatory work lies ahead before the carrier is ready for viewing by prospective bidders. Sales manager Shareen Tommasi says: "Yes, we want to privatise, but first we must make the airline a good bride."
Air Namibia has yet to be told how much of it is to be privatised. "Namibia has an open policy on foreign investment - it's up to the government to decide whether it's a minority or a majority stake," says Tommasi. However, she expects 26% of the airline to be sold initially, with a later increase to 49%, leaving a majority stake in government hands. Tommasi says the airline is keen not to lose its identity to a bigger player.
Industry speculation points to South African Airways as a potential partner, after a memorandum of understanding for a commercial alliance was signed in January. "Yes, we would like a strategic equity partner," says Tommasi. "It would be wishful thinking at this stage to say that SAA will be our prospective partner. It's difficult at this stage to know who it might be." She says SAA is currently too preoccupied to make a move on its neighbouring airline. "SAA has so many things to sort out right now. But in six to 12 months' time, that may well change."
The long-term commercial alliance of SAA and Air Namibia incorporates regional feeder carriers South African Express, South African Airlink and Kalahari Express Airline. SAA and Air Namibia started codesharing between Johannesburg and Windhoek on 1 April and there are plans to extend codesharing in the future. The alliance also covers schedule harmonisation, codesharing and mutual support in terms of maintenance, engineering, accounting, reservations and staff training.
"We recognise the strength of each carrier's respective network and that co-operation will be mutually beneficial to both airlines and to our customers, while also maintaining each carrier's unique identify and culture," says Ahmad.
SAA alliance partner Lufthansa is another candidate rumoured to be interested in a stake in the carrier. "Yes, we're in discussions with Lufthansa as a strategic alliance partner," says Tommasi. Next year, Air Namibia will start codesharing with Lufthansa into the German flag carrier's Frankfurt hub.
Ahmad says Air Namibia is seeking an alliance partner in Europe to secure a three-cornered agreement. "With three partners in place, we will achieve stability on the revenue side." Air Namibia has also started talking informally to other airlines in the region, including Air Zimbabwe and Air Botswana.
"The talks are at an infant stage but the enthusiasm is there," says Tommasi. The airline wants to establish several links with a number of small players in order to "have the synergy of a lot of small airlines," she adds.
Alliance plans
As for speculation over whether Air Namibia would join the Star Alliance mega-grouping, Tommasi says: "It depends on what we would get out of it. After all, we're a very small player."
While the carrier's alliance plans are growing, its network expansion plans are limited. New routes to be added include a codeshare service to Johannesburg with SAA starting on 4 April and one to Cape Town later this year. Other routes being considered include Dubai and services to Cameroon and East Africa, subject to market demand, says Tommasi. Looking to Europe, the carrier sees potential in new services to Paris or Rome. "Both of these might justify one weekly service," says Tommasi.
Otherwise, the airline is shunning expansion. "We can think of a future flight to North America but at this time we want to focus on consolidation," says Ahmad.
The carrier flies predominantly high-yield passengers on its regional routes. "Almost 50% of passengers on regional routes are business-class travellers," says Tommasi. On European routes, however, the airline carries mainly leisure traffic.
Tommasi is reluctant to reveal exact passenger numbers but concedes: "We hit a dip last year but now we're seeing upward growth again." Once the new season's schedule is implemented, "then we should be back on track again," she adds. Aircraft operated by Air Namibia on its network include one Boeing 767-300ER, one 737-200, three Raytheon Beechcraft 1900Cs and an ATR42, leased from Air Botswana.
The airline appears on the verge of replacing its 767-300ER with a 747SP for its long-haul routes, when the lease on the 767 expires in October. The 767 is not ideal for transporting heavy cargo loads from Windhoek, which is 5,500ft above sea level and where temperatures can hit 35¼C.
Help may be at hand, however. SAA is set to retire three 747SPs. In the short to medium term, Air Namibia means to lease aircraft, but in the longer term will consider buying. "If I had the money, I'd rather buy than lease," says Ahmad.
Air Namibia was expected to acquire two Boeing 767s on lease towards the end of last year, but no decision was made.
Ahmad knows he has a tough task on his hands to cut costs, restructure and recapitalise a struggling carrier. But he also has a sense of urgency.
"I'm here on a contractual basis and have told our shareholders that if I don't perform, then fire me. If I don't deliver the goods, then I'll get the boot."
Source: Airline Business
