AMCON takes over Arik Airline on N135bn debt

The Asset Management Corporation of Nigeria (AMCON) yesterday, February 9, 2017 took over the management of the embattled Arik Airline over N135 billion debts owed the Corporation.

The corporation, which likewise announced the appointment of Roy Ilegbodu, a veteran aviation expert, to take over the management of the airline under the receivership of Oluseye Opasanya, a Senior Advocate of Nigeria, said its action was to save the country’s aviation industry from total collapse.

Industry analysts say the take over is a relief for the airline, due to its rising debt burden.  Arik Airline has recently been struggling to  sustain its operations, as rising costs and declining margins impacted negatively on its performance.

Even though the airline has 25 aircraft in its fleet, about eight have been grounded, while two have been abroad for the regular checks.

Arik Air recently suspended flight operations to the John F. Kennedy International Airport, New York, United States, as the two Airbus A330-200 aircraft dedicated to the route have been taken to France for C check, which is an extensive visual inspection of specified areas, components and systems, as well as operational and functional checks of an aircraft for maintenance purposes.

Besides owing workers’ salaries, the airline has  not been remitting the taxes of workers to relevant bodies. The airline is also said to have been unable to meet up with  lease payments and insurance premium on its aircraft.
However, experts have hinged some of the challenges of the airline on the failures of the Nigerian Civil Aviation Authority, (NCAA) to conduct periodic safety and financial audits on airlines, as stipulated in its regulations.

NCAA Regulations on airlines financial health, Part 18.10.3 states that all Nigerian licensed airlines shall submit to the authority on a monthly basis, all financial data and records on their operations in the form and manner as may be prescribed by the Authority.

Experts in the aviation sector have said that the financial state of airlines cannot get to an abysmal state overnight, for the NCAA to have responded only after the airline had reached a conclusion to suspend their operations.

“The passive action of the NCAA in the oversight functions over the operators has for over five years  been the major contributor to the travails of the industry.

“The airline problems are single ownership, poor management structure, especially absence of management board, poor financial management and diversions of financial returns or divestment into other businesses, recurring debts to major services providers,” John Ojikutu, former Commandant of the Murtala Muhammed International Airport (MMIA), Lagos, told BusinessDay.

However, Dele Ore, former president of the Aviation Round Table (ART), told BusinessDay that the development is coming at a time when the airlines’ are facing so many challenges.

“If  the NCAA conducts the audit and lets the whole world know the condition of the airlines, people will not patronise the airlines. An airline that cannot pay its staff is no longer a safe airline, if the NCAA discloses issues like these to the public, they will shut all the airlines down, which means the NCAA will also be shutting themselves down,” Ore added.

For some time now, the biggest indigenous airline, with an estimated 55 percent market share of the load in the country, has been going through difficult times.

The airline’s inability to pay worker’s wages for several months has led to occasional confrontation between the management of Arik and different Aviation Unions in the country.

However, the management of Arik Air has stated its determination to challenge the take-over of the airline by the Asset Management Corporation of Nigeria (AMCON)

This was disclosed by the deputy managing director of Arik Air, Ado Sanusi at the airline’s headquarters in Lagos.  Sanusi stated that Arik has agreed to comply with the court order directing AMCON to take over the management of the airline, but that the airline will challenge the decision to the highest order in the land.

He said the airline might disagree with the court order, but agreed to the take-over, so that the airline’s operations would continue and not be paralysed.

He said, “We were served with the court order this morning and Arik Air will comply with the order. The airline has the right to challenge the order and will challenge the court order. We might disagree on certain issues, but we have agreed that Air operations should continue and not be paralysed.

“We will make our position known to our various stakeholders and partners. We will challenge this order to the highest level”.

Oluseye Opasanya, the receiver manager, stated that the management of AMCON, having consulted widely with  government authorities, has decided to appoint him the receiver manager, to superintend the affairs of Arik Air, to sustain and improve its services.

He said AMCON would ensure that it supports the airline with people of great knowledge and experience, to improve its fortunes.

Opasanya said he had addressed the workers earlier, on the new development and the need to keep the airline flying and relevant to the industry, as there are many Nigerians under employment of Arik Air.

The receiver manager noted that AMCON is willing to support the operations of Arik Air, with the support of  government, to meet the essential needs of the company.

He said AMCON would reach-out to other creditors of the airline, both foreign and local, in order to secure their co-operation and commitment.

Opasanya said the mission now is not to talk about the airline’s huge indebtedness, as the airline is owing huge sums of money, but how to rescue the airline from total collapse.

Ukpebo Ilegbodu, the technical consultant to the receiver manager, stated that their mission in Arik Air , was to bring efficiency to the airline.

He said there was a lot of work to be done to stabilise Arik Air, to ensure safety and bring flight operations of the airline to normal.

Jude Nwauzor, head, Corporate Communications Department of the corporation, told Business Day that the move was aimed at instilling sanity and confidence into the sector.  This underscores government’s decision to instil sanity in the nation’s aviation sector and prevent a major catastrophe.
The development will afford Arik Airlines, which is the largest local carrier, the opportunity to go back to regular and undisrupted operations, avoid job losses, protect investors and stakeholder funds, as well as ensure safety and stability in the already challenged aviation sector.

IFEOMA OKEKE