Lagos — Ever since Virgin Nigeria Airways (VNA) announced the suspension of its long-haul flights from Lagos to London and Lagos to Johannesburg, its fortunes have gone from bad to worse.

The once proud airline, credited with upping the ante and setting new standards for domestic air travel in the country, is about to lose six members of its senior management staff comprising executive directors and other senior executives.

Some of them were seconded to the Nigerian airline by Virgin Atlantic Limited (VAL) under a Technical Services Agreement (TSA).

The top executives who have resigned their appointments with effect from this month are the Managing Director/CEO, Conrad Clifford; Chief Operating Officer, Kevin Dudley; Director of Safety, Alistair Henry; Director of Ground Operations, Yves Gilbert; Director of Maint-enance, Jim Barnes; and Mr Ronnie Classen who also was contracted to the airline in an executive capacity.

Yesterday, the airline announced that the Deputy Managing Director, Captain Dapo Olumide, will become the new Chief Executive Officer on June 18, 2009.

The mass resignation of the senior executives along with other management staff of VNA is linked to among other factors the harsh global operating environment that has dogged the aviation sector, the inability by the airline to raise badly needed working capital to revamp and expand its operations, and shareholder issues that hindered the sale of 42 per cent of VAL's shares to United Bank for Africa (UBA) Plc and Afrinvest Limited, a Lagos-based investment firm, in September last year.

Since the airline was fully constituted in March 2005, it has had a co-branding and distribution/point of sale relationship with UBA, in addition to domiciling its operating accounts and salary accounts with the bank.

The relationship shortly afterwards evolved when it became clear that VNA would have to secure a bridge facility from banks, because its initial working capital from shareholders' funds had been eroded by the TSA and lease agreement it had with VAL.

Even though VAL invested almost $25 million in VNA in lieu of its 49 per cent stake in 2005, it immediately took back most of the money through exorbitant management and leasing fees, thus leaving the Nigerian company with insufficient working capital.

On this basis, VNA requested UBA for a bridge facility of $20 million to cover working capital financing and aircraft guarantees. The facility was subsequently restructured to a $40 million loan for a 24-month period.

One of the main conditions for the approval of these facilities by UBA was the irrevocable domiciliation of all sales proceeds generated locally with UBA and the execution of a right of set-off on the company's accounts with the bank.

In early 2007, discussions began between VNA and UBA involving the re-financing of the company through a zero coupon bond issue of $100 million for working capital and to pay off outstanding debts to VAL.

By this time, VNA owed VAL royalties amounting to $11 million for the use of the Virgin brand under a Trade Mark Licence Agreement.

The facility given the company by UBA was then withdrawn and replaced with a global facility in February 2007 which covered an overdraft facility of $26.5 million, a bond and guarantee facility of $13.5 million, and bridge facilities of $5 million (available in Lagos) and $20 million (available in New York).

All these were granted by UBA to enhance its cash flow and augment working capital requirements. There was also a bank guarantee facility of $10 million for the Umrah and Hajj operations.

By late 2007, VNA's board then determined that its exposure to UBA was too high and advised the management to look for cheaper ways of refinancing the airline.

The decision coincided with VAL's decision to sell down its equity in the Nigerian company from 49 per cent to 7 per cent.

VAL, like all airlines around the world, was contending with the harsh operating climate and was under pressure from its equity partner, Singapore Airlines, to divest from other loss making ventures.

On the advice of Afrinvest still in 2007, VNA decided to undertake a private placement, followed by an initial public offer at a future date.

The airline was convinced that through this arrangement it could raise $300 million, which would enable VNA settle its loans and still have working capital to pay at least for two of the brand new Embraer aircraft it had ordered from Brazil.

In the interim, attempts to sell VAL's shares through a private placement were proving unsuccessful.

Initially, VAL tried to sell the 42 per cent of the shares in VNA for $85 million to UBA without the knowledge of the board of the Nigerian airline.

The sum was later negotiated downwards to $55 million despite the objections and court injunctions by the company's shareholders, who were by this time aware of the deal.

When that failed, the shareholders later consented to the sale on the condition that First Bank of Nigeria (FBN) Plc partners UBA in the transaction.

FBN, however, got frustrated with delays and pulled out, leaving UBA as the sole interested party for VAL shares by April 2008. UBA then offered VAL $24 million for its shares and $11 million to pay for the outstanding royalties for the use of the Virgin brand, totalling $35 million.

As all this was going on, VNA was haemorrhaging badly, compelling its management to seek the assistance of Afrinvest to acquire the shares and re-inject the proceeds of $35 million from the sale into the VNA, pending the time the private placement and IPO takes place.

But UBA went to court to stop the deal with Afrinvest, and insisted that it must be part of the transaction.

In order to save the airline, UBA and Afrinvest agreed to partner on the deal by acquiring the 42 per cent VAL was offering for $35 million.

Both firms (UBA and Afrinvest) were meant to hold 50 per cent each of the shares that were to be sold by VAL, and warehouse same as underwriters to the transaction until such a time they could be offloaded through a private placement and IPO.

But the timing for the transaction couldn't have been worse. UBA and Afrinvest had consented to pay for the shares on September 30 2008, but failed to pay the amount owing to the global credit crunch.

In frustration, VNA went back to UBA for another facility that was needed to pay for the first Embraer aircraft which was ready for delivery.

Given the stricken situation in which it found itself, VNA's board had to sign away a full asset debenture of all its assets as part of the conditions under which its facilities would be rolled over by UBA and fresh funds amounting to $35 million be made available for the Embraer aircraft.

Today, VNA is indebted to UBA to the tune of $203.5 million, was compelled to lay off several workers late last year, suspended its long-haul flights in January, has seen its aircraft fleet reduced from 10 to five, and is in danger of losing the Virgin brand.

On top of all these, it is still grappling with how to recapitalise its operations.

Sources on VNA's board who have been privy to the airline's attempts to get out of the woods, said the situation got to a head, forcing Clifford and other expatriate executives to resign after failing for almost three years to turn the airline around and make it competitive.

A non-executive director of VNA, who confirmed Clifford's resignation, feigned ignorance of the resignation of other key staff with the airline, maintaining that they are contract staff whose contracts may not have been renewed on expiration.

He defended UBA's role in the entire Virgin saga, and explained that had UBA not insisted on the full asset debenture, it would have been in violation of CBN credit guidelines.

"UBA played a significant role in funding the company, without which it may not be alive today. Its demands were not out of the ordinary as any other bank would have done likewise under the same circumstances," the source said.

The director was confident that VNA can still be turned around, and that plans were underway to conclude the deal on the sale of VAL's share which would then be sold through a combination of a private placement and IPO.

"The environment today is different from what it was a year ago. We are confident that the company can still be recapitalised to enable it pay its obligations to UBA and expand the business," he said.

On whether VAL will withdraw the Virgin brand, the director said VNA's directors had advised the British airline not to withdraw the brand as this could devalue VNA and dampen investor interest in its shares.

VAL, he said, had accepted the advice in good faith.

"As long as there is an acceptable plan for payment of the backlog of royalties due VAL for the use of its brand and safety standards are adhered to, VAL has no intention of pulling its brand," he said.

Announcing Olumide as the new CEO in a press statement yesterday, VNL Chairman, Mr. Felix Ohiwerei, said the appointment had been approved by the board.

Olumide, who joined the airline late last year as Deputy Managing Director, had the oversight responsibilities for Commercial Planning, Sales and Marketing, Cargo, and Corporate Aviation and he brought with him 25 years of aviation experience as well as a brief period in banking.

The new CEO is an aviation professional who earned a Bachelor of Science degree from Embry-Riddle Aeronautical University in Florida, USA in 1980 after which he joined Aero Contractors in 1982.

Following many successful years, he was appointed the Deputy Managing Director in 2002 at which point he transformed the original company vision from an exclusively B2B model to the more demanding and more modern B2C approach.

Prior to joining Virgin Nigeria, Olumide had a brief stint as a banker with the Africa Finance Corporation (AFC), specifically in the area of Transport Infrastructure project development.

Making the announcement in Lagos, the outgoing Managing Director, Clifford, said: "I am thrilled that Capt Olumide is taking over from me. We have worked together in these past months and I am certain of his capabilities. He worked with me firstly as the Chief Commercial Officer and as Deputy Managing Director."

Clifford also said: "Virgin Nigeria Airways will indeed be repositioned as he comes in as Chief Executive with years of experience in airline administration especially now that the business has been restructured to focus on its profitable domestic and regional service".

Reacting to the appointment, Olumide said: "I am coming on board at a period when the global airline industry is going through challenges but with the rest of the hard working team, I am sure we will further position the airline and make it safe and profitable.

"We will keep premium to safety and passengers' comfort at all times and our passengers should look forward to an airline that adds value. This is our promise".