Tuesday, 9 September 2008

Should Malawi Government finally let go Air Malawi?

According to today’s (9th September 2008) Nation Newspaper, the Government has offered British Airways-owned Comair 49 percent shareholding in Air Malawi for K490,000, (about US$ 3,500) including an "irrevocable option" to increase the prospective buyer’s stakes to 80 percent. The Nation concludes: “spelling the final death of the national carrier”.

According to the paper they sourced a shareholders’ agreement which indicates that Comair’s shares will go up to 80 percent and government will provide and guarantee loans for the new company. The paper further quotes People’s Progressive Movement (PPM) president Aleke Banda, as saying the sale will be a huge mistake for government to dispose off Air Malawi in a hurry.
"It is important to preserve some of the national assets. Actually, government should do everything possible to save the airline. I know of countries that are regretting their decisions to dispose their airlines in a hurry," said Aleke who made a similar appeal together with UDF finance spokesperson Friday Jumbe in Parliament. The two served as finance ministers before.

Opinions in Malawi are varied. I have always been for selling off the airline. I negotiated the first coming of COMAIR in 1998-99 when I was Chief Executive of MIPA. I stumbled upon their impressive financial performance when I was in a Cape Town hotel. On my way back to Malawi, I stopped over in Johannesburg and met the CEO interesting him of the Air Malawi opportunity. After a month, a COMAIR team came to Malawi and as MIPA we organized meetings with all stakeholders including Privatisation Commission. COMAIR then had 12 planes with a workforce of fewer than 400 people. Air Malawi had effectively 2 planes and with over 800 members of staff.

It stunned COMAIR. They were however keen to offer a sub-franchise of British Airways (subject to Air Malawi equipment passing the BA tests), not on account of what they saw in the books, but rather the routes that Air Malawi had, which was an added value to its strategy of targeting tourist markets. When Government at that time dragged their feet, we helped COMAIR get traffic rights to fly into Malawi (South Africa – Malawi Agreement provided for each country being able to have two airlines fly into each other’s country).

I see arguments of those that want to keep the “national asset” as trying to keep 100% of 0 instead of keeping say, 49% or 10% of 100. Air Malawi is technically bankrupt and keeping it as is, is basically betraying tax-payers in Malawi who require these resources for better use (health, education etc). Zambia has no national airline, but its airports are busier than those in Malawi. The private carrier currently operating has grown by the day.

I flipped through newspapers and websites and found what I already knew that what Malawi Government is trying to do, is a world-wide phenomenon because national airlines are no longer assets, national assets are those that give your money and not those that drain your cash. Here is a sample of what I found.

1. JAT AIRWAYS TO BE PRIVATIZED
Jun 05, 2008: Serbia decides to privatize national airline
Serbia has decided to privatize JAT Airways, the Balkan country’s national airline, over the course of the summer. The flag carrier will be officially listed for sale by the end of the month,

2. Libyan state airlines to merge ahead of sell-off
Published: 25 July 2008 16:21
Tripoli plans to streamline flag carriers into single, profitable business to attract international investors.

3. Italy's national airline files bankruptcy
THE ASSOCIATED PRESS • AUGUST 30, 2008
ROME — Alitalia said Friday it has sought bankruptcy protection, taking the first step in a plan to reshape Italy's unprofitable and debt-laden national carrier.

4. KUWAIT, April 28 (Reuters) –
Kuwait's government started the sales process of its loss-making national carrier, Kuwait Airways Corp [KA.UL] (KAC), state-owned Kuwait News Agency (KUNA) reported on Monday, citing the cabinet affairs minister.
Kuwait's parliament in January approved a government plan to sell 40 percent of the carrier to the public and 35 percent to a long-term investor within two years.

5. Argentina Agrees to Sell Majority Share of Its Airline
By SHIRLEY CHRISTIAN, SPECIAL TO THE NEW YORK TIMES
Published: July 20, 1990
LEAD: Argentina, which agreed last month to sell its national telecommunications company to Spanish and American interests, has now agreed to sell a majority share of the national airline, Aerolineas Argentinas, to a consortium led by the Spanish airline Iberia.

The few articles above highlight the reality in the world of flying. Should Air Malawi be liquidated and a new joint venture established with COMAIR? I will go for it. What do you think?

4 comments:

mlauzi said...

watipaso,

welcome to the blogal-global revolution. your voice will be a contribution to "mabloga," (malawian bloggers).

but how about the figure at which air malawi is purportedly being sold? why USD3,500, for an entire airline? is that how much its assets, including airplanes, etc, are really worth? or is that question irrelevant?

steve

bankelele said...

$3,500 for an airline? how bad is it doing? even so, it's routes muct be worth much more than that. there's no guarantee that the governemtn will be able to run the airline better on its own, and 'national asset/interest' as a reason for a government to own an airline is long past its time

Anonymous said...

When you sell an enterprise you enter into an agreement on whether the buyer inherits the enterprise's debts or not - and price considerations follow the agreement. If Air Malawi is worth USD80 million, for argument's sake, but it has USD200 million in debts, I see no reason why government cannot sell it to Comair for MK500 (yes, Faifi Handede Kwacha) and let Comair inherit her debts. What a relief to the consolidated fund that will be.

That aside, I enjoy reading your articles Watipaso. They show that they are a product of a well informed person. Keep writing.

Harold.

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