Home » Aviation: Southern African carrier, Malawi Airlines set for recapitalisation

Aviation: Southern African carrier, Malawi Airlines set for recapitalisation

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Malawian

Determined to keep its national airline in the skies, amidst financial distresses, Southern African carrier, Malawi Airlines is set to undergo recapitalisation process to stay afloat in the aviation industry.

According to ch-aviation.com, Malawian President Lazarus Chakwera has opted for recapitalisation of technically insolvent national flag carrier, Malawi Airlines rather than to let it go under.

State House spokesperson Brian Banda told The Daily Times 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.

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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,” he said. Banda could not confirm how much funding the government would provide.

Chakwera’s intervention follows a decision by the airline’s board on March 25, 2021, when it recommended an orderly winding up of the highly indebted company. According to resolutions of the board meeting, Malawi Airlines had cumulative losses of MKW14 billion kwacha (USD17.86 million) in February 2021 against accumulated debts of MKW13.8 billion (USD17.5 million).

Last month, Chakwera met Malawi Airlines Chairperson George Partridge and retired aviation officials in separate meetings to find a solution to the airline’s problems.

In August last year, equity partner, Ethiopian Airlines (ET, Addis Ababa) asked the government to recapitalise the airline to the tune of MKW7 billion (USD8.8 million). “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 read.

As previously reported, Ethiopian had withdrawn aircraft it had provided to the carrier – a B737-700 and a DHC-8-Q400 – following disagreements with the Malawian government over its initial reluctance to financially support the airline which had failed to turn a profit for the past seven years.

Malawi Airlines is a partnership between the Malawi government (51%) and Ethiopian Airlines (49%).

According to the board, while the airline’s revenues had been dwindling even before the pandemic, costs of operation remained high amid difficult trading conditions because of COVID-19.

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“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 recommends an orderly winding up of the company and further recommends the appointment of a liquidator to discharge obligations and minimise further liabilities,” the resolution read.

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