9 December 2013

Nigeria: FG Won't Have Stake in New National Carrier, Says Ministry

The Ministry of Aviation has shed light on the plan for Nigeria to have a national carrier, saying the federal government has no stake in the airline project and that all its shareholding will be taken over by the public.

It also confirmed that Aero and the defunct Air Nigeria would be merged to become part of the new carrier, while Arik Air, for now, is excluded from collaborating to establish the carrier because the owner refused to go public and that the airline has a high, complex debt profile.

But Arik Air Chairman, Chief Joseph Arumemi-Ikhide, disputed the claim as he accused the ministry of not carrying the airline along in most of the things it is doing.

A top official of the ministry who craved for anonymity while speaking to THISDAY on the matter, also explained that the new airline would be designated as a carrier in the mould of British Airways and Lufthansa, whose equities are owned by the public but they are recognised as the national carriers of UK and Germany respectively.

The source said Embraer would provide about 10 aircraft for the operation, including the two owned by the defunct Air Nigeria, which would be refurbished and that the Asset Management Corporation of Nigeria (AMCON) has acquired the assets and debts of Aero Contractors and Air Nigeria.

The source said these two airlines would form the fulcrum of the national carrier but Arik might become a part of the new airline depending on the agreement reached between the airline and the federal government in January at a planned retreat to discuss the future of aviation in Nigeria.

THISDAY learnt that AMCON had directed Aero to assess the assets of the defunct Air Nigeria, which together with the latter, would have nine operating aircraft before the ones ordered from Embraer and Boeing are delivered for the takeoff of the national carrier.

The source said Aero was considered the most viable platform for the new airline because of its 52-year history and maintenance record, and the fact that it and Air Nigeria had been taken over by government.

He said: "Arik Air although owe banks but it has been unwilling to go public. Government will have zero per cent stake. AMCON is by law allowed to take on bank debts of any business. It owns 60 per cent of Aero, which has been converted to equity. It owns 100 per cent of Air Nigeria. The shares will soon be listed on the Stock Exchange for the public to buy.

"The airline to be unveiled before the end of the year is collaborating with Ethiopian Airlines, which according to the agreement, will use its long haul aircraft to operate the international destination of the new Nigerian carrier until the new airplanes ordered from Boeing are delivered.

"We are also talking with two other Middle East airlines for long haul destinations in the Middle East, including Abu Dhabi and Dubai which are now major financial and operating hubs for business." The source further explained that AMCON owns Chanchangi and IRS although they are not part of the national carrier project, adding that by next year, the aircraft ordered from Embraer would begin to arrive. The ministry said the initial plan was for the new carrier to start with the aircraft ordered but because of the time it would take for the ordered aircraft to be delivered, the airline would now start with those in the fleet of the airlines forming the nucleus of the national carrier.

"Also, a brand new plane can cost from $90 million to $250 million, depending on the size and configuration, apart from the waiting period of three to five years, but these funds would be provided by the investors" the source said, adding that Embraer was planning to build a maintenance facility in Kaduna for the maintenance of its aircraft that would be operating in Nigeria and the West African sub region.

However, Arumemi-Ikhide, in an interview with THISDAY, disputed the explanation of the ministry on why it would not be part of the airlines to form the national carrier.

He attributed this to a communication gap that had developed between Arik and the ministry which did not carry it along in most of the things it was doing, adding that it would be wrong to say that the airline refused to go public.

Arumemi-Ikhide disclosed that Arik Air, which he described as an international airline, had concluded plans to go public by registering at the London Stock Exchange.

On debts, he said the total amount owed by Arik was about 10 per cent of its assets, which was put by international consultants Deloitte and Touche at $3.7 billion.

He added that the airline is able to do business with international institutions, including financiers and airline manufacturers, because it has credibility.

"Arik Air is worth $3.7 billion and its assets were valued by the renowned Deloitte and Touche and you can verify this. This is our net value. We are planning to go public and we will soon register at the London Stock Exchange. PricewaterhouseCoopers is doing our account because we want to go public. We are going public in UK because we are international company. The ministry does not talk to us," Arumemi-Ikhide said.

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