THE Namibian taxpayer had to fork out more than N$1.6 billion to end Air Namibia’s toxic aircraft rental deal with an American leasing company.
The Minister of Public Enterprises, Leon Jooste in a statement, said that the Namibian Government as the shareholder in the former national airline was exposed through guarantees that were issued to back the leasing of two Airbus A330 aircraft and the fact that the Treasury was paying the rent while Air Namibia was unable to do so.
Options available to the Namibian Government included sub-leasing the aircraft, purchasing the aircraft or agreeing on the early termination of the leases with Castlelake.
“If we managed to secure a buyer in advance the option to purchase and then sell the aircraft seemed like an elegant solution but further investigation showed that the specific aircraft type was no longer as sought after as before and on top of that Castlelake responded that they would expect a purchase price of more than a billion dollars (US$100 million) per aircraft,” Jooste said.
The minister indicated that Cabinet resolved that a commercial lawyer and a consultant should be hired to renegotiate favourable terms to terminate the A330 lease agreements and to settle the Government guarantee.
He said that a consultant from the United Kingdom was appointed along with a local law firm.
“The aviation business is extremely complex, and we were dealing with one of the largest operators with access to the highest level of technical skills the industry has to offer and it was never an option to even consider this process without the technical assistance we received from these specialists,” he said.
After an extended negation with Castlelake, it was agreed between the parties that Namibian taxpayers will pay a total of N$1 642 993 980 to settle outstanding amounts and to terminate the lease agreements for the two aircraft.
“This was an intense and extremely complicated negotiation process that went on non-stop for ten exhausting months. I believe that we were successful when one considers the baseline from where we started, the fact that the lessor had grounds to call on the guarantee resulting in a USD154 million (minimum) immediate payment, and the risk mitigation measures built into the agreements,” Jooste said.
He added that the cost of around N$5 million spent on professionals to provide the required technical and legal assistance represents incredibly good value and was money well spent considering the fact that the Treasury saved close to N$1 billion.
Jooste aid that the savings can now be redirected towards other important priorities.
