There are indications that Aero Contractors, the oldest airline in Nigeria, is on its way to closing shop. This follows the current financial crisis in the company, compounded by foreign exchange scarcity, high cost of aviation fuel and low passenger traffic.
After 61 years of flight operations in Nigeria, the airline has N50 billion unserviceable debt and can currently boast of only two old aircraft — a Bombardier Dash 8-300 and a Boeing 737-500 — without operating cash to sustain its operations.
However, experts in the aviation sector said all hopes may not be lost for the falling airline as there are some urgent interventions that can be deployed to save the airline from going under.
Alexander Nwuba, managing director, Smile Air Ghana and former MD, Associated Airlines and WestAir Benin told BusinessDay the airline may need to first incorporate new structures and split the business.
“Aero is in a situation where its liabilities create the impossibility as a going concern. In other climes like the USA, they would file a chapter 11 bankruptcy, meaning that they can longer pay their debts and force their creditors into a settlement so that the business can continue. Here it is not possible,” Nwuba said.
“If you cannot pay your debts, the government either rescues you, a buyer comes to the table to pay your debts or you quit the business. In the case of Aero with a stupendous debt profile, now under the management of Asset Management Corporation of Nigeria (AMCON), it’s either AMCON writes off the debt or finds a buyer,” he said.
He said AMCON has over the years tried to see if it can resuscitate the business but all they have ever seemed to achieve is to pour kerosene into fire and Aero comes out of it, worse, now it’s obvious that AMCON no longer wants to fuel the fire and there is talk of a shutdown.
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He said this invariably means that the business will disappear, which doesn’t have to happen as there are still many lucrative and profitable parts to the business that can be spun off and sold.
“The methodology I proposed is to establish Aero parts, a part trading and aircraft support company, Aero maintenance, to continue the profitable aircraft maintenance business; Aero support, to provide field support to the industry, Aero Services, which can leverage the 62-year business experience and provide services across many sectors from training to manuals and business process development; catering, cleaning etc. and the core airline business which requires the Air Operating Certificate (AOC), so the helicopter and aircraft business would not be easily split,” Nwuba said.
He explained that these businesses can be sold into the marketplace or, the current employees can engage investment bankers to help them raise money to buy the businesses that they have demonstrated knowledge and skills in, adding that the proceeds of the sale will go to the main Aero which can then reduce its liabilities and liquidate the rest of the assets such as planes.
For John Ojikutu, aviation security consultant and Secretary-General of the Aviation Safety Round Table Initiative (ASRTI), when AMCON took over Arik and Aero, the corporation was supposed to find out the total amount owed by the two airlines locally and internationally, find technical and credit buyers both locally and international, dispose the remaining debts in the stock market to the public as shares and establish the two airlines separately as flag carriers or combine the two to form a national carrier.
Ojikutu said asking AMCON to be running the two airlines to recover more than N300 billion is a task that can only be achieved in 30 years if the receiver can make an annual net profit of N10bn, which can only be achieved by an aviation corporate organisation not a new asset receiver like AMCON.
Speaking on how to save the airline, he said there is a need to find out if the aircraft in the airline fleet are older than most contemporary airlines in the country, regional or continental.
“Aero never had the problems it was having until the British technical partners left in 2010 when the Ibru family took over its running and became independent and in the hands of Nigerian management. Two years later, precisely in 2012, it joined new airlines like Arik to begin sourcing about N20 billion government intervention funds.
“Is anyone going to conclude that old aircraft and forex brought Arik too to the level it is? Unless we find out how these airlines got involved with over N200bn intervention funds or whoever facilitated the funds for them, we can never find solutions to their problems,” he said.
Olumide Ohunayo, an aviation analyst, told BusinessDay that AMCON have bitten more than they can chew, hinting that when they came into the industry everyone was happy because they promised to resuscitate the airline and save jobs but have failed.
“I expected that by now, Aero would have sold the airline to investors and this would have allowed the airline to survive. There were some aircrafts that were leased out which did not favour the airline. It is sad that things are happening this way. Aero was very successful and the best-managed airline at the time and still holds their safety records. We hope investors can still pick up the ashes of the airline,” Ohunayo said.
