The Preferential Trade Area (PTA) Bank has given the about to be liquidated Air Malawi seven days to repay a K1.1 billion (US$7.9 million) loan the airline got in 2005.
Air Malawi used the loan to purchase a Boeing 737-300 Aircraft which it was recently trying to use as collateral for a loan in one of Malawi’s commercial banks.
Deputy Government Spokesperson John Bande has said government is aware that the PTA Bank has given the airline until this week to pay back the money.
“Since we are about to change the company’s set-up as government we are going to take care of this together with the airline’s other debts,” he said.
Government which refused a wholesale take over of Air Malawi by Comair is currently discussing with the South African firm as it plans to liquidate the company and establish a new company with at an ownership ratio of 80 percent Comair and 20 per cent government.
“We denied the airline to use the plane as collateral to get K300 million loan from NBS Bank as well as it intentions to increase its overdraft facility with the National Bank of Malawi to K150 million from K80 million,” he said.
He said this could not be possible because government has already decided on the future of Air Malawi.
Transport and Public Works Minister Henry Chimunthu Banda says government is tired of funding the company at a continued loss and it cannot continue wasting resources.
“The company has debts hovering above K5 billion and although the picture seems to look rosy after we had pumped in some money, the company has become a burden to government,” he said.
PTA Bank’s Head of Legal Services a Mr. P. Mungar has told the airline in a letter dated April 29, 2008 that if the loan is not paid in full within seven days it shall invoke its rights under the financial agreements to recover the risk without further reference to the Air Malawi.
The bank says the amount to be re-paid include interests, commissions, charges and costs which has been outstanding as at April 30, 2008.
“Despite various discussions and several demands the loan instalments and interest continue to be in arrears,” says the letter.
Air Malawi Chief Executive Wisdom Mchungula in February this year wrote government to allow it get a loan from a local bank to off-set part of the PTA loan.
The airline CEO has complained that it has been failing to source any financial help elsewhere after depleting its resources when it was servicing one of its airplanes that had a technical problem due to government’s unwillingness to provide it with a letter of support which it last got in 2007