It was learnt that AMCON, a Federal Government-owned bad debt manager which owns controlling stakes in both Arik and Aero, chose to establish the new airline as a clever means of wriggling out of the multibillion naira liabilities currently hanging on the two carriers.
AMCON was established by the Federal Government in 2010 to buy over bad debts from commercial banks in order to save the banking system from imminent collapse. This followed the 2009 financial industry crisis in the country.
The bad debt manager has a mandate to recover bank loans from several companies whose bad debts had been bought over by AMCON.
AMCON took over the management of Arik and Aero some years back, following the two carriers’ inability to continue servicing their debts running into several billions of naira.
Unconfirmed reports said AMCON had made failed attempts to sell the two airlines apparently due to their huge liabilities and likely litigation from the original owners.
The latest move by AMCON to pool its assets especially planes in the two carriers is expected to help the bad debt manager to recover its investment in the two carriers ahead of its winding down in 2023.
A top AMCON official familiar with the deal, who spoke with Sunday PUNCH on condition of anonymity, said, “We are not trying to merge Arik and Aero. We are trying to strategically assemble all our aviation portfolios under one umbrella. The challenge of selling Aero is humongous. The challenge of Arik is even double. Our interest is not in the branding level, it is in our portfolio – the money we invested over the years to protect these airlines.
“The management gave us a strategy. The one we did with Bank of Industry. A lot of money was pumped into those airlines and that is why they are still standing till today. I am sure you heard when Ethiopian Airlines was rumoured to want to buy Arik.
“Why you hear of a debt profile of close to N300bn, it is very scary. If you assemble all your assets under a fresh umbrella, dealing with the thing will be easy. That is what management is trying to do. Even the idea of merging the two airlines is difficult. That is what is going on.”
Further findings by Sunday PUNCH revealed that the airline, might be launched probably by June.
According to aviation industry sources, AMCON has gone as far as 80 per cent of the steps it needs to take towards setting up the carrier.
A top official of AMCON also confirmed this, saying, “The launch date for the airline depends on a lot of variables. You know there are a lot of certifications you need to do before you begin to fly. We have gone far but cannot tell you how far we have gone now. But we have covered 80 to 90 per cent of the journey.”
Asked if the carrier could take to the sky before mid-year, the official said, “Most likely, but don’t say I said this. The management will put out a statement when this happens. I have not been to a meeting where we have a targeted time.”
Giving further insight on the proposed Nigerian Eagle, the official said, “Apart from Arik and Aero, we have other aviation assets. We have something with Dana and Afrijet; there are a couple of aviation assets we have scattered here and there. These are what we want to assemble under one umbrella
“It is not going to be a merger, it is like let us say you gave Company ‘A’ about 20 buses to start a transport business on the condition that at the end of every year, it pays you N1bn. Now you decide to collect the entire money and assets and give it to Company ‘B’ and ask it to run the business because it is more responsible than Company ‘A’. That is why I said it is not going to be a merger but a strategic realignment of the portfolios.”
However, there are concerns in the aviation industry that the original owners of Arik and Aero may take AMCON to court over the current move.
But another top official of AMCON allayed such fears.
He said, “The thing is that we have over 3,000 cases in court. I don’t think there is any institution that owes us serious money that is not in court with us. They have a strategy of delay; they keep delaying until they say AMCON has wound down and everybody will go and take their money. From day one of the takeover, they have been in court with us.
“The Federal Government gave us the mandate to take over. Those hiding under the law to delay the debt recovery process will now circumvent those payments. The court cases for us are distractions, minor distractions and delay tactics. The question we often ask them is whether they borrowed this money or not. They say “Yes”. Have you paid? They say “no”. Then what is the issue? So, the court cases will always be there.
Industry sources have also raised concern on whether AMCON has the power to establish an airline.
But the official said, “The challenge people do not completely understand is that the amended AMCON Act which the President signed into law last year gave us some powers that you can describe as unimaginable but those are the realistic ways of recovering this money.
“That is what happened in Malaysia. In Malaysia, the government took it to a level that if you are a driver of a big man who is a debtor, you are not sure that that driver would not kill you because the driver believes that it is because of you that his country is not developing. It becomes a national crusade and that is why they recorded the successes. Those court cases will come but we are also waiting for them.
“Those powers are there in the Act because of these delay tactics. That is why the National Assembly went back to redraft the Act, amended it and gave AMCON these additional powers to trace the assets of anybody anywhere in the world. The Economic and Financial Crimes Commission, police, Independent Corrupt Practices and other Related Offences Commission will join and we will trace the asset without recourse to anybody.”
Asked whether Nigerian Eagle may own up to 10 planes at inception, an AMCON official said, “It may even be more.”
Meanwhile, it was gathered that about two aircraft belonging to Arik Air had been repainted in the livery of Nigerian Eagle. The two planes, it was learnt, were being painted in Ethiopia.
Industry officials, however, told one of our correspondents that the aircraft had yet to be de-registered at the Nigerian Civil Aviation Authority as Arik Air assets.
“They (AMCON) are still going ahead with the rebranding but they should wait for litigation coming from Arik. The owners of Arik will not lie low,” a source at the Ministry of Aviation, who pleaded not to be named due to the sensitive nature of the matter, said.
“I think two Arik aircraft have been repainted but they have not been de-registered yet. I think the problem will start when they write to NCAA for the de-registration of the aircraft,” the official added.
On claims that the immediate past Chief Executive Officer of Aero Contractors, Ado Sanusi, resigned from Aero to head AMCON’s airline, the source said the claim was true.
The Aviation ministry official said, “Capt. Ado may be appointed to head the new airline by AMCON. His appointment in Aero was done by AMCON. AMCON has every right to send him to any place they want. He is their employee.”
On what would happen to Arik and Aero when the new carrier eventually emerges, the ministry official replied, “The owners will take back what remains of their airlines.”
However, senior personnel at the Federal Ministry of Aviation were silent on the matter when contacted for official comments on the matter.
Asked to state the role of the Ministry of Aviation in the proposed airline by AMCON, the ministry’s Director, Public Relations, James Odaudu, replied, “I’m not aware of the ministry’s involvement.”
Industry sources however said the Aviation ministry would not be involved in the new airline, noting that AMCON would basically deal with the NCAA on the matter.
“Aviation ministry does not have a hand in AMCON. They have no business with AMCON,” another Aviation ministry official who is familiar with the matter, said.
“AMCON does not have to deal with the ministry but with the NCAA. The NCAA is the regulator and so AMCON will just apply. It is when the corporation wants to import aircraft that it will apply for ministerial approval.
When contacted, the spokesperson for AMCON, Jude Nwauzor, confirmed to our correspondent that the corporation was floating an airline.
He declined to give further details, adding that the carrier would issue a statement on the matter very soon.
Meanwhile, some aviation experts have reacted to the development.
A former Managing Director of the Nigerian Airspace Management Agency, Captain Roland Iyayi, said AMCON was only devising means to recover its loans to the carriers.
He said, “If a bank decides to call in its credit, what will happen is that they would have had an agreement with the debtor that if certain conditions are not met over a specific period of time, they would take certain actions. And those actions could lead to them calling in their credit.
“Now, if the debtor had signed up to that, there is very little that the courts can do in terms of changing that arrangement. In this case, the debts are very bad debts because I know clearly that Arik or Aero, neither of them can in any way earn enough to pay off their interest let alone the principal. So, as long as you keep the airline operating without them being able to meet up their obligations, you are postponing the doomsday.
“So if AMCON based on whatever transaction they have, says that the best thing to do is to take out their assets from the two companies, it is like having a clean slate and hopefully have an airline that is devoid of debts.
“Because for as long as the debts of those two companies are there, anything they earn will not cover their liabilities. So they have looked at the two companies and may have decided to set up an entirely new company.”
Iyayi, who is the Chief Executive Officer of Top Brass Aviation, noted that there were some measures available to AMCON to effectively manage the situation.
Asked whether the move by AMCON was a right one, he replied, “As I said, it depends on the transactional documents between AMCON and the debtors.
“That document will indicate whether or not they have the powers to do what they are doing. If they do, then it will be a good proof and it might be very difficult to argue on the steps they are taking now.
“So if the circumstances support them to be able to take those actions, then it might be useful.”
He stated that there was a time AMCON nursed the idea of merging Aero and Arik to set up a national carrier but it was rejected by the aviation ministry.
He noted that the idea was to take the assets of Aero and Arik and set up a new company, so that the new carrier would have started with about 10 to 20 aircraft.
He, however, said there was a need for AMCON to tell the public how much Arik and Aero owed the agency as well as its current stake in the two airlines.
Ojikutu, a former military commandant of the Murtala Muhammed International Airport, Lagos, said, “We need more details. Why didn’t they do this before now? A lot of things have happened in Arik. Arik is said to be owing about N300bn. How long will it take the carrier to pay it back? Assuming Arik is making N10bn profit every year which is not possible, it will take the airline about 30 years to pay off its debt. But like I said, AMCON needs to give us more information.”
Another industry expert and Publicity Secretary of Aviation Round Table, Olumide Ohunayo, felt the new airline might be greeted with long litigation process.
He said, “I was thinking that AMCON would have a holding company to merge Arik and Aero, using their areas of strength. One is good with the maintenance and the other has operational prowess by virtue of equipment and location.
“So I was thinking that merging them through a holding company would be made to keep the airlines alive and also paying their debts. But what we are seeing now is a total emasculation of the airlines and using the assets of the initial investors to start a new carrier.”
“Not just to be thrown out because we are looking at the pride of having a carrier owned by us. That is a wrong way to start such an airline.”
Arik Air was founded in 2002 by its Chairman, Joseph Arumemi-Ikhide. In April 2006, Arik took occupation of some of the former Nigeria Airways facilities in Lagos.
In October 2006, seven months after taking occupation of some of the old Nigeria Airways’ premises, Arik Air was inaugurated, opening its doors to the travelling public on 30 October 2006.
The airline grew its fleet size to over 22 planes and was travelling to over 16 destinations before it was taken over by AMCON in February 2017.
Arik flew to New York, London, South Africa, Dubai and other international destinations.
AMCON had explained that the airline was immersed in heavy financial debt burden that threatened to permanently ground the carrier.
During its peak, Arik carried about 55 per cent of the passenger load in the country.
According to Wikipedia, Aero Contractors was formed in 1959 and was officially registered in Nigeria in 1960.
The airline had a fleet size of seven aircraft and operates into 13 destinations.