Assets Management Corporation of Nigeria (AMCON) yesterday disclosed that it would quit Arik Airline after six months.
Making the disclosure while appearing before the Senate Committee on Banks, Insurance and Other Financial Institutions in the National Assembly the Managing Director of AMCON, Ahmed Kuru, said the entire take over arrangement of the airline would last for six months.
He said the federal government had to move into Arik because it would have been unfortunate if the airline had folded up.
Kuru revealed how Arik squandered its goodwill and several efforts it made to save it from going into extinction or forestall its takeover which eventually occurred last Thursday.
He listed Arik's many sins to include: failure to comply with terms of restructuring of its debt twice; failure to provide a-three year record of remittances to the Federal Aviation Authority of Nigeria (FAAN), diversion of N21.38 billion Bank of Industry (BoI) loan obtained for the airline by AMCON, as well as well as its refusal to co-operate with monitoring manager appointed by AMCON, among others.
"In September 2011, AMCON restructured Arik's debt from N85 billion to N70 billion as a nine-year term loan running at 12 per cent per annum. Other terms of the restructure included the following:
"AMCON to appoint a resident monitoring manager who shall have the authority to call for any of Arik's records for examination; Arik to provide three-year record of its remittances to () FAAN. Arik defaulted on the term of the restructure and failed to make the monthly repayment as agreed. In May 2013, AMCON sourced N26billion of the CBN fund through BoI on behalf of Arik.
"AMCON disbursed N21.38billion of the BoI loan to Arik as working capital. Out this amount, N2.4billion was meant for reconfiguration of two aircraft from passenger to cargo carriers. This was never done as the funds were diverted by Arik management and is now the subject of EFCC investigation. Both aircraft were abandoned in the United Kingdom. In December 2015, due to accrued interest and unpaid principal, a second restructuring was proposed for Arik debt to reduce the debt from N138billion to N90billion. The proposal is awaiting CBN approval.
"This was proposed based on Arik's plan to do a private placement and subsequently do an IPO within a period of six months. Based on that, they were expecting N44billion from Afrexim as a bridge. None of this happened as Arik could not comply with any conditions given to them. In spite of the leniency and good faith demonstrated by AMCON throughout the negotiations, Arik refused or neglected to adhere to the terms of settlement," he said.
Kuru who lamented how despite AMCON's sustained efforts to bear Arik's burden by paying N9.05 billion of its debt, the airline was indifferent to this gesture as it refused to cooperate with the AMCON's resident monitoring manager and equally failed to disclose information on its financial status.
Kuru who put Arik's indebtedness to AMCON at N146 billion, added that the agency also acquired three other non-performing loans obtained by companies in which its Chairman, Sir Johnson Arumemi-Ikhide, has interests at N264 billion.
He said this amount was besides another N165 billion Arik owes commercial banks such as Standard Chartered, Zenith, Ecobank and Access.
He also said the airline was owing federal aviation agencies N26billion; $11million owed European aviation agencies and service providers and $20million owed to Lufthansa Technique.
Kuru further said AMCON could only recover N4.6 billion, representing 3.2 per cent of its total debt, stating that the airline only voluntarily paid N50 million in the last he year.
He also disclosed that Arik's airline was a profitable venture with N7 billion earnings every month, an amount he said was enough to successfully run its operations but for its attitude of failing to service debts which he said led to accumulation.
He added that Arik had about 30 aircraft, the largest fleet in Nigeria, out of which he said only 10 are operational at the moment, pointing out that the airline holds approximately 55-60 per cent of the air transport market in Nigeria and served 18 domestic and 11 international destinations, including Johannesburg, London, Dubai, and New York City.
He, however, ruled out the possibility of converting the airline to a national carrier, saying it will not be a viable option but will rather complicate the situation and promised his agency's commitment to keep the 2,000 staff of Arik whom he said were being owed salary arrears of five to seven months, depending on the department where they work.
He narrated how Ethiopian Airline had been invited to stabilise Arik after the takeover but upon its arrival, declined because of Arik's bad state.
He also disclosed that upon its takeover, its foreign flights had been suspended because it is far more expensive, noting that the cost of aviation flight on a trip to New York for instance is N1.4 billion.
He also disclosed that N10 billion had been pumped into the airline to get it stabilised as he disclosed that the value of its assets is paltry N40 billion, explaining that selling its assets would not be a viable option but rather to ensure smooth running of its operations, saying with N7 billion income every month, it will begin to pay back its debt in the next three months. "In the next 30 days, Arik will regain its lost glory in the last three years," he added.
He disclosed that KPMG had been engaged to conduct a detailed forensic audit of Arik
He also added that a South African company had also been employed to work out AMCON's exit plan from Arik.
He said in the last one week, flights delays and cancellations had become a thing of the past in Arik.
In its reaction, the committee hailed the takeover of Arik but observed in view of its deteriorating state that the take over was long over due. The committee Chairman, Senator Rafiu Ibrahim, pledged the committee's support for its action.
Also, while speaking when he appeared before the House of Representatives Committee on Aviation yesterday, Kuru said AMCON was currently in talks with international airline operators, that would manage and ensure the revival of the airline. He, however, did not reveal the names of the international operators.
Justifying the takeover before the Hon. Nkeiruka Onyejeocha-led committee, Kuru said Arik management had woven a web of debt around itself from which it could not extricate itself, and would have collapsed in about eight weeks, if the federal government did not intervene.
He cited several reasons why the government had to seize the company, to include poor corporate governance, a demotivated workforce due to non payment of salaries, defaulting on payments to their contractors, including caterers and fuel suppliers.
He also noted that Arik management did not remit passenger charges to regulators, failed to fulfill their financial obligations to regulatory agencies such as Nigerian Civil Aviation Authority (NCAA) and Nigeria Airspace Management Agency (NAMA), and was known for constant flight delays, cancellations and luggage pilfering or outright luggage loss.
Onyejeocha however queried if Arik would not go the way of Aero Contractors, which still went under despite the takeover by AMCON.
She also sought clarifications into allegations that Arik was taken over, as part of a ploy by the Federal Government to convert it into a national carrier.
Kuru told the committee that there are no plans to convert the airline into a national carrier, even though the initial design of Arik Airlines, was for it to be a private sector national carrier.
He also allayed fears that the airline company would collapse like Aero Contractors, noting that the circumstances are different.