Leaving Arik Air in limbo

Many months after AMCON took over the management of Arik Air, the corporation has been unable to reposition the airline to profi tability thus making the future of the airline look bleak, reports IME AKPAN

Since the Asset Management Corporation of Nigeria (AMCON) took over the reins of power at Arik Air, the airline which prides itself on being the fastest growing airline in West and Central Africa, has been in the news for anything but good reasons.

It is either the airline has scaled down its operations for lack of capacity or fuel marketers have stopped supplying aviation fuel to it due to backlog of debts or its aircraft have been cannibalised to provide spare parts for other carriers, among some other disturbing news.

Since the takeover, functional aircraft in the airline’s fl eet have reduced from 30 to about 10; daily fl ights have plunged from 150 to a disappointing 30.  Arik Air, in the restructuring phase, has suspended all international operations except to Ghana, resulting in the A330 fl eet being parked in France while some have been abandoned in its hangar at the domestic wing of the Lagos Airport.

Simultaneously, KPMG has been appointed by AMCON to conduct a forensic audit on Arik Air’s books.

Th e audit covers the position of assets and liabilities and their utilization, recording and utilization of loans, propriety of third party transactions; fraud controls over procure to pay, agents and business partners and fi nancial reporting as well as the airline’s fi nancial position as at January 31, 2017.

Lately, there have been reports about a plan to parcel out the airline to Ethiopian Airlines.

According to reports, the airline had submitted a formal off er to take charge of troubled carrier.

“We have outlined our terms and conditions to the Nigerian government and we are waiting to see if they agree.

We are capable and desirous of handling the airline,” Ethiopia Airlines’ managing director of international services, Esayas Woldemariam, was quoted as saying.

Although Woldemariam did not specify details of the off er, he said he expected to face competition for Arik from international airlines.

Analysts say Ethiopian is pursuing ambitious development at home, with the $345 million expansion of Addis Ababa’s Bole International Airport, and abroad, having acquired a 49 percent stake in Malawian Airlines and 40 percent of ASKY Airlines in Togo.

According to them, Nigeria, with the largest population in Africa and high demand for air travel, is an attractive prospect for an ambitious airline.

But no sooner had the planned sale been made public than AMCON distanced itself from the arrangement.

“Our attention has been drawn to a barrage of media reports, which claimed that there are discussions going on with Ethiopian Airlines for the carrier to render management services to Arik.

“Contrary to these reports, AMCON is not aware of any current discussion or negotiation with the management of Ethiopian Airlines regarding Arik Air Limited (Arik).

“Arik was placed in receivership last February, following the airline’s inability to repay debts in excess of N300 billion to AMCON and other creditors in Nigeria and around the world.

It is on record that the Receivership Team has within the period stabilised the operations of the airline, marked by stability of schedules; improved on-timeperformance (OTP) and revamped customer service among others.

“Today, the airline has regained its dominance as the most reliable carrier in the country with growing passenger patronage and confi dence.

Th e general public and all stakeholders will be kept duly informed on issues relating to the airline’s divestment plan,” said AMCON in a press statement.

In June, the airline’s shareholders held talks with a Middle East-based fi rm to partner with the carrier and underwrite the debts it (Arik) owes to AMCON and some other creditors.

It was also gathered that the shareholders had been holding series of meetings with some other investors including an Asian conglomerate which considers Africa as a veritable place for investment.

“Th e plank of discussion is on the shareholding and the depth of the debts, which creditors must back with evidence, and also operational conditions.

“Th e company is willing to build maintenance, repair and overhaul (MRO) facility in Nigeria if government gives it the needed support because it (company) has voted funds to invest in Africa.

“We have been having discussions with investors…but we are having serious discussion now with this organisation, which is based in the Middle East because they have a package to invest in Africa and take advantage of the growing economy in the region.

“Th ey are interested in expanding our operations and will give us additional aircraft in addition to the six we ordered from Boeing; so we have to expand our operations throughout Africa and other international destinations with their partnership.

“Th ey are eager to invest in Nigeria but, of course, with the support of the Nigerian government.

Th ey said government support is crucial because you cannot really succeed in airline business without government’s support and that is necessary for them to invest in Nigeria or they will take their funds to another African country,” said the source.

Prior to the news of Ethiopian Airline’s interest in taking over Arik, the former vice chairman of Arik, Senator Anietie Okon alleged that some unnamed people in government had planned to sell the airline but the takeover by AMCON put paid to that plan.

Okon alleged in an interview that some vested interests took advantage of the airline’s fi nancial distress occasioned by economic downturn in the country that forced it into recession as well as the plunge of the value of the naira.

“Th is made it extremely diffi cult to obtain foreign exchange and run the airline, which has the largest fl eet in the country.

Th e bad economy also aff ected some other companies in the country, which rely on forex to sustain their operations,” he said.

“In other societies, government would have stepped in to save the airline (Arik) by providing it and others support, knowing that the economic problem was a national issue.

Instead, it forcefully took over Arik and today the airline is operating less than 40 per cent of its capacity,” he added.

On February 9, 2017, AMCON announced the formal takeover of Arik which had been struggling with debts of over N300 billion and appointed Mr.  Seyi Opasanya (SAN) as receiver-manager with Capt.  Roy Ukpebo Ilegbodu as the managing director.

At a meeting of the senate committee on banking, insurance and other fi nancial institutions, AMCON’s managing director, Mr.  Ahmed Karu said Arik’s debt profi le stood at N352.5 billion out of which the airline was indebted to AMCON alone to the tune of N146 billion as at December 2016 due to mounting interest and unpaid principal.

In 2011, he said the corporation acquired Arik’s N71 billion nonperforming loan from Union Bank and Keystone Bank, N14 billion.

Karu also said the airline was indebted to Standard Chartered Bank, Zenith Bank, Ecobank and Access Bank to the tune of N165 billion in addition to the foreign components of its huge debt portfolio.

Th e AMCON chief also accused the airline of not abiding by the settlement plan of the agreement reached with the creditors, despite what he described as “leniency and good faith demonstrated by AMCON throughout the negotiation.

” Th e minister of state for aviation, Senator Hadi Sirika had described the intervention as “timely” saying “it will stabilize the operations of the airline.

” “Th is will enhance the long term economic value of Arik Air and revitalize the airline’s ailing operations as well as sustain safety standards, in view of Arik Air’s pivotal role in the Nigerian aviation sector,” he said and pledged the support of the ministry of aviation to the new management of the airline.

But what is the future of the airline amidst controversies, claims and counter-claims, denials and counter-denials? Does AMCON have the Midas touch? Aero has almost become a non-existent airline after its takeover by AMCON.

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