President Lazarus Chakwera has opted for recapitalisation of the technically insolvent national flag carrier, Malawi Airlines, rather than to let it go under, State House has confirmed.
Chakwera’s intervention follows a decision by the board of the airline on March 25 this year, when it recommended an orderly winding up of the highly indebted company.
According to resolutions of the March 25 board meeting, Malawi Airlines was in a cumulative loss position of K14 billion ($17.86 million) as of February 2021 and had accumulated debts of K13.8 billion ($17.5 million).
Last month, Chakwera met Malawi Airlines Chairperson George Partridge and retired aviation officials in separate meetings to find a solution to the ailing airline’s problems.
State House Press Secretary Brian Banda told The Daily Times on Tuesday that Chakwera had opted not to have the company liquidated.
“Following consultations with stakeholders, President Chakwera has determined that liquidating the airline would cost six to seven times more than recapitalising it to keep it afloat, with no viable alternative immediately available to fill the gap, and no readily available funding to pursue such an alternative.
“As such, he has taken decisive steps to have the airline recapitalised in the short term while working with stakeholders to identify long-term solutions to the airline’s underlying woes,” Banda said.
But Banda could not indicate how much the government would pump into the firm to recapitalise it.
Partridge was not immediately available for comment on Tuesday and Wednesday to shed light on how much additional capital the firm needed to remain in business.
But, in August last year, Malawi Government’s equity partner in the airline, Ethiopian Airlines, asked Capital Hill to pump in K7 billion as a recapitalisation package.
“ET [Ethiopian Airlines] suggested that the board should inform the shareholders that the company has no money and cannot resume operations and should consider looking for dissolution,” the request document reads.
Chakwera’s decision could bring a sigh of relief to the 71 locals under Malawi Airlines books, who faced the prospect of losing their jobs.
According to the firm’s directors, while the airline’s revenue has been dwindling, costs of operation remained high and could be covered by revenues when the environment remains hostile as a result of the Covid pandemic.
“In the absence of any injection of capital and with all the requested cost reduction relief measures not being approved, it is, therefore, resolved that under the circumstances, where shareholders of Malawi Airlines have not committed recapitalisation of the business or approve the requested relief measures and that the going concern is uncertain, the Board of Directors recommend an orderly winding up of the company and further recommend the appointment of a liquidator to discharge obligations and minimise further liabilities,” the resolutions further say.
Malawi Airlines is a registered partnership company with shareholding between the Malawi Government (51 percent) and Ethiopian Airlines (49 percent).