A leaked document that Malawi News has seen shows how President Joyce Banda’s cabinet attempted to save the debt-ridden now-liquidated flag carrier Air Malawi by, among other things, trying to sell spare parts.

The 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-serviced engine which could realise approximately US$800,000 (K328 million),” the committee proposed.

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

He said while these measures were being considered, it became apparent that the level of liabilities was much higher than had been reported.

“The resource requirements were far in excess of the realisable values of the spare parts and the spare engine,” he said.

He said the maximum that could be realised from sale of the spare parts fell far short of the approximately K10 billion the airline owed to various creditors.

“In any case creditors were applying enormous pressure on the airline towards having it compulsorily liquidated which would have been not only extremely chaotic but embarrassing for the nation,” he said.

Lipunga disclosed that the commission participated in two meetings with very aggressive creditors that were not going to settle for anything other than liquidating the assets of the airline.

“It is against this background that government was advised to file for voluntary liquidation so that the liabilities of the airline were ring-fenced,” he said.

The ring-fencing of liabilities through the voluntary winding up scheme, the PPPC CEO said, “was intended to provide a measure of security to the creditors; to assure them through a guarantee that their debts would be paid.”

“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.

“Service had become more and more erratic and unpredictable.”

He said this led to realisation that no one was left with any doubt that continuing the operations of the airline while knowing that the airline was insolvent was not only illegal under the Insolvency Provisions of the Companies Act, but would have been an irresponsible act as it simply would have worsened the airline’s already precarious financial position.

“It is at this point that government sanctioned the discontinuance of the operations of Air Malawi and our energies were therefore oriented towards the identifying of a new technical partner to assist in the rolling out of a new airline,” said the privatisation chief.

He was optimistic that once rolled out the new airline will restore the glory of the aviation sector in Malawi.

“Our brothers and sisters and friends of the former Air Malawi should have an opportunity to be considered for re-employment,” he said.

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

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