Nigeria: How Arik Air Became Moribund Under AMCON in 5 Years - Investigation

··· operational aircraft, staff strength dip 81%, 85%

Barely five years after the Asset Management Corporation of Nigeria, AMCON, took over the management of Nigeria's domestic airline, Arik Air, the airline has become almost moribund under the new receivership.

The development, stakeholders attributed to lack of competence and expertise has forced the company into significant reduction of both staff strength and operational aircraft.

For instance, before the asset management company took over the airline's receivership in 2017, over 3, 258 workers were running daily operations, but currently the airline can boost of only 500 staff.

Also, the airline had a total of 27 aircraft running domestic operations in Nigeria, but currently the airline can barely operate five aircraft.

Arik air before now, was the only airline that operates brand new aircraft and was reputed for its safety record but today, the airline has become almost moribund

A source from the airline told Vanguard Aviation World that incompetence, not understanding the aviation business were the major reasons why the airline went down from a major player to a struggling carrier.

"By the time AMCON took over Arik Air there were critical decisions to be made about the airline operations. They needed to inject funds into the company to sustain it.

"Few months after its takeover some of the aircraft inherited were due for checks; so, the priority was supposed to be how to carry out checks on the aircraft but because they lack the expertise, their attention was drawn to other issues, like negotiating the loans with international financiers.

"The new management under receivership was supposed to be talking with engine manufacturers and lessors because what should be their objective was how to put the airline back to full operation and how to come out of receivership, but somehow they didn't know the right thing to do and suppliers lost faith in them; a situation that made things very difficult," he said.

AMCON inheritance

Findings showed that AMCON inherited 17 airworthy airplanes. Three out of these number needed minor repairs. The first one needed its nose wheel to be changed. The second one needed a change of its pilot tube, which is used to measure the speed of the wind and the third one needed its main wheel at the back to be changed.

Also, the aircraft checks were not conducted as at when due, this made most of them become Aircraft On Ground, AOG, and were no more airworthy for flight service.

AMCON move to cede Arik Air

Report indicated that AMCON established other companies and even attempted to shutdown Arik Air and cede the assets to another company, NG Eagle and Super Bravo and in doing that shirk off the debts owed by the company to aviation agencies, suppliers and others and that was after it had reduced Arik Air operations and operating aircraft.

But the AMCON Receiver Manager, Omokhide Alaba attributed the failure of Arik Air to challenges it faced before AMCON took it over, saying that due to the airline's debt exposure there was paucity of operational funds, which hamstrung its ability to adequately utilize its equipment.

"Banks restrained what it was lending to the airline and oil marketers were doing cash and carry because most airlines did not have liquidity, so they were trading with airlines on cash and carry basis. It was only MRS that was giving aviation fuel on credit to Arik Air," he said.

Omokhide also explained that the National Assembly gave AMCON necessary powers to take any action in rescuing any organization and making reference to the doctrine of necessity that allowed former President Goodluck Jonathan to take over as President when the late Musa Yar'adua died, Omokhide said AMCON was given such powers to rescue companies but above all, to save the banks by absorbing the debts owed them by business organisations and ensure the survival of the banks.

"AMCON empowers the Receiver Manager to establish Special Purpose Vehicles (SPVs) to buoy organizations and save them from going under," he said.

On the sale of NG Eagle, Omokohide said that AMCON did not receive the regulatory support it desired to run NG Eagle so it has to offload it, explaining that the company was not sold as an airline, but as a company.

"We did not receive regulatory support so we have to divest from NG Eagle. So NG Eagle was like a tabular rasa when we sold it. NG Eagle was supposed to be debt free. If you check the AMCON Act the main objective is to preserve the banking industry because banks preserve other businesses. So, we have to save the banks in order to prevent their contagion from other industries. Banks are the enabler of businesses. So, the primary responsibility of AMCON is to buy bad debts. AMCON has recovery objectives, which they apply to resuscitate ailing businesses," Omokhide said.

Stakeholder reacts

Reacting to the development, former Military Commandant, Murtala Muhammed Airport, Group Captain John Ojikutu, stated that he was aware that nothing better can come out of the takeover without involving credible technical partners and investors.

In his word: "Arik that was barely four years in operation and was said to be owing over N300 billion then. I said it will take AMCON more than 30 years to recover the debts if it can make net profits of N10bn annually which was not possible with the air fares then and the passengers traffic.

"Even now, it is practically impossible. If the airline has just four of the 27 aircraft flying, what has happened to the rest? Are they within the county or outside for maintenance or have they been recovered by the vendors because of debts payments?

"I made a few suggestions at the time of the receivership that Arik and Aero assets and debts both locally and foreign be thoroughly assessed and get credible foreign and local investors and technical partners to buy them out.

"That was never a choice for the people in the administration of the government but AMCON.

"Twenty-seven or seventeen aircraft, but four left, where are the remaining? Who authorised their exit from the country if truly the airline is still in debt? How much of the debts owed by these airlines has AMCON recovered for the government and if any for the banks? Who authorised AMCON to sell part of the assets to NG Eagle or any other investors.

"How much has AMCON recovered from the defunct Air Nigeria or UBA that claimed the debt of defunct Virgin Nigeria as intervention fund for Air Nigeria? Very clumsy you will say but that is what the intervention that the ministry of aviation had no record on was all about.

"This is one reason why I do not support again into the Nigerian Air project nor should government venture into the project any longer except it is a government airline and not National Carrier.

"Two national flag carriers could come out of the two airlines as regional and continental for one and Intercontinental for the other. America has no national Carrier but flag carriers and this is now the global practice Europe inclusive."

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