Gov’t considered selling spare parts in saving Air Malawi from creditors -report

Government attempted to save the debt-ridden now-liquidated flag carrier Air Malawi by, among other things, trying to sell spare parts, it has been reported.

The leaked document, a presentation to the cabinet committee on Air Malawi marked ‘confidential’ dated July 3, 2012, entitled ‘The Future of Air Malawi Limited,’ proposed breaking some disused equipment (grounded planes) for sale to generate resources.

“Immediately available is a fully-service engine which could realise approximately US$800, 000 (K328 million),” the committee proposed, according to a report in Malawi News of Saturday June 15, 2013.

Also to put on sale were two other un-serviced engines which the committee said would have fetched approximately US$250, 000 (K102.5 million).

“The sale of other parts should also be explored and net off all repair claims against the proceeds. A conservative estimate of US$200, 000 (K82 million) net could be realised,” the confidential document reads in part.

It was suggested that the proceeds would go towards financing of any interim options and servicing retrenchment costs.

However, it was also acknowledged at the time that the airline and pressure to settle a total of US$2.2 million (K902 million) debt for engine repairs for the ATR, unpaid leasing costs as well as other services.

This comes at the back of demand from ex-employees of the liquidated Air Malawi Company Limited recently who want government to pay them over K643 million towards their Pension Fund.

Public Private Partnership Commission (PPPC), which has been behind the disposition of the company through liquidation and the establishment a new entity with partnership of Ethiopia Airways, says Air Malawi was pursuing its own turn-around efforts against the backdrop of severe cash-flow challenges and mounting liabilities.

PPPC Chief Executive Officer Jimmy Lipunga said the airline desperately needed far more resources to pay off liabilities.

“I wish to point out that the decision to sell spare parts, dry-lease another plane and retrench staff was being taken on the assumption that these efforts would restore the airline’s lost glory,” he said as quoted by the weekly.

He added: “Let me point out that the life line of Air Malawi had come to an end. The airline was cash-strapped with no planes to fly, members of staff were demoralised, the airline relied on very expensive wet lease options to shore up the dwindling market share.”

Lipunga said: “Had we not acted in the manner we have, a more embarrassing outcome would have ensued. Creditors would have taken over the assets.”

He said government was advised to file for voluntary liquidation so that the liabilities of the airline were ring-fenced.

“The government had wanted that Air Malawi could continue providing services until the entry of a strategic partner. Unfortunately, the reputation of the airline was so badly damaged that Air Malawi could hardly secure the minimum level of traffic necessary to sustain the service,” explained Lipunga.

“Services had become more erratic and unpredictable.”

The privatisation chief expressed confidence that once rolled out the new airline will restore the glory of the aviation sector in Malawi and the former workers of Air Malawi should have an opportunity to be considered for re-employment.

Apart from identifying the technical partners, the cabinet also discussed interim operations, financing and staffing of the new airline. It observed that with 250-member personnel, Air Malawi was overstaffed – the paper reported.

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