FG Takes over Troubled Arik, AMCON Says Airline Too Important to Fail

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• Carrier vows to challenge court-ordered take over

Chinedu Eze

After months of uncertainty over the fate of Nigeria’s largest carrier, the federal government yesterday finally took over the management of Arik Air, stating that the decision had become necessary to save the distressed airline, which it said was “too important to fail”.

A statement by the Asset Management Corporation of Nigeria (AMCON), which obtained a court order to take over the airline, said Arik will now be managed by Captain Roy Ukpebo Ilegbodu, a veteran aviation expert, under the receivership of Mr. Oluseye Opasanya (SAN).

In justifying the take over of the airline’s management, AMCON said the action was taken to save the airline, which accounts for about 55 per cent of domestic passenger traffic.
It said its grounding would have caused a major catastrophe in the aviation sector and the Nigerian economy at large.

“The development will afford Arik Airlines, which is the largest local carrier, to go back to regular and undisrupted operations, avoid job losses, protect investors and stakeholders’ funds, as well as ensure safety and stability in the already challenged aviation sector,” AMCON said.

The AMCON statement also quoted the Minister of State for Aviation, Senator Hadi Sirika as saying: “We believe that this appointment is timely and will stabilise the operations of the airline.

“This will enhance the long term economic value of Arik Air and revitalise the airline’s ailing operations as well as sustain safety standards, in view of Arik Air’s pivotal role in the Nigerian aviation sector.”

The minister pledged that his ministry would support the new management of the strategic carrier, adding that all the necessary steps had been taken to ensure that there is no undue disruption in Arik’s regular business operations or activities of other stakeholders on account of the recent changes in the leadership and management of Arik Air.

“In the same vein, Capt. Ilegbodu, under the receivership of Opasanya, has also assured both staff of the troubled airline and all other stakeholders that his appointment at Arik would among other objectives enhance the value of Arik, improve customer experience, and sustain the safety, reliable and secure operational history of the airline before all those are eroded,” the statement said.

AMCON also stated that Arik Air has been in a precarious situation, largely attributable to its heavy financial debt burden, bad corporate governance, erratic operational challenges and other issues that required immediate intervention in order to guarantee the continued survival of the airline.

It said all these led to the call for the authorities in the country to intervene before Arik goes under like many airlines before it.

Providing further insight into the state of affairs at the airline, AMCOM said: “Yesterday (Wednesday, February 8, 2017), Arik temporarily suspended its flight operations to the John F. Kennedy International Airport, New York, United States, claiming that the two Airbus A330-200 aircraft dedicated to the route had been taken to France for C check at the same time.

“Equally more than eight aircraft are currently grounded at the tarmac, making it difficult to meet their routine commercial flights.

“The myriad of issues confronting Arik Air of late range from confiscation of aircraft due to non-payment of leases, frequent flight delays, and constant fracas between Arik staff and irate passengers at both local and international airports, etc.

“During the last yuletide season, passengers were stranded in airports all over the country due to Arik’s incessant flight delays and cancellations, which negatively affected the preference they enjoy from passengers. You are all living examples of this.

“The airline is so overwhelmed to the extent that the workers’ wages are not paid for several months, leading to occasional confrontation between the management of Arik and different aviation unions in the country.

“It was Arik’s inability to pay its workers for seven months that forced the United Labour Congress (ULC) and Engineers’ Union to recently shut the offices of the airline across the country causing untold hardship to thousands of travellers and embarrassment to the aviation sector in the country.

“Besides owing workers’ salaries, the airline has also not been remitting the taxes of workers to the relevant bodies, thus defrauding the country.
“The airline is also in perpetual default in its lease payments and insurance premiums, leading to regular and embarrassing repossession of its aircraft by lessors.

“Various class actions are pending against the airline all over the world.”
AMCON assured all stakeholders that the intervention was in the best interest of the general public, workers, creditors, and other aviation interest groups.

Also speaking on the issue, a senior official, who preferred not to be named, informed THISDAY that the intervention was necessitated by the fact that Arik is “too important to fail”.

He said, in addition to the revelations made in the AMCON statement, Arik’s inability to honour its payment obligations to creditors and other suppliers had forced Lufthansa Technik AG, which provides maintenance, repair and overhaul (MRO) services to the Nigerian airline, to withdraw its services over unpaid bills of about $20 million.

The official revealed that the airline is currently indebted to AMCON to the tune of N135 billion. “The AMCON debt does not include another N100 billion owed other creditors,” he said.

He said AMCON and the aviation ministry will be coming up with a holistic plan to turn around the airline.
Some of the measures being considered, he revealed, include the injection of capital into the airline and instituting proper corporate governance on how it is run and managed.

THISDAY learnt that the federal government started making moves to take over Arik last week when Sirika invited Ethiopian Airlines for a meeting on how it would provide technical support to the Nigerian carrier.

It was gathered that the federal government was in negotiations with Ethiopian Airlines, Africa’s most successful carrier, to enter a management contract and take over the day to day running of Arik.

The agreement was to allow the chairman of Arik, Mr. Joseph Arumemi-Ikhide and his family to retain their interest in the airline, but Arumemi-Ikhide will be asked to step down from his executive position.
Ethiopian Airlines, revealed an informed source, has given its nod to the contract, if certain conditions are met.

“What they want to do is akin to the arrangement between the defunct Nigeria Airways Limited (NAL) and KLM. But it was a mistake to choose European airline then.
“Now government wants to work with a successful African airline and I am very sure it would be a good arrangement,” said source.

THISDAY also learnt that most of the debts Arik Air owes government are guarantees from local banks given to international financiers for the acquisition of aircraft.
It was the guarantees that facilitated the acquisition of the Airbus A340-500 aircraft. Arik was also said to have used four other aircraft as collateral for loans taken from local banks which all went bad.

All the non-performing loans were taken over by AMCON and could be converted to equity, effectively making the federal government part owner of the airline.
However, reacting to the take over yesterday, the management of Arik vowed to challenge its removal by AMCON.

Making this known, the Deputy Managing Director of Arik, Captain Ado Sanusi said at the airline’s head office in Lagos that Arik has agreed to comply with the court order directing AMCON to take over the management of the airline, but the airline would challenge the decision to the highest court in the land.

He said the airline might disagree with the court order, but has agreed to the take over so that the airline’s operations would not be paralysed.
“We were served with the court order this morning. Arik Air will comply with the order. The airline has the right to challenge the order and will challenge the court order.
“We might disagree on certain issues, but we have agreed that Air Air operations should continue and not be paralysed.

“We will make our position known to our various stakeholders and partners, we will challenge this order to the highest level,” he said.
Speaking earlier, the AMCON appointed receiver manager stated that the management of AMCON, having consulted widely with the government, decided to appoint him the receiver manager to superintendent over the affairs of Arik to sustain and improve its services.

He said AMCON would ensure that it supports the airline with people of great knowledge and experience to improve the fortunes of the airline.
Opasanya said he addressed the workers earlier yesterday on the development and the need to keep the airline flying and relevant to the industry, “as there are many Nigerians under the employ of Arik Air”.

He said Arik Air plays a pivotal role in the airline industry in the country.
The receiver manager said AMCON was willing to support the operations of Arik Air, together with the support of the government to meet the essential needs of the company.
He said AMCON would reach out to other creditors of the airline, both foreign and local, in order to secure their co-operation and commitments.

Opasanya added that the mission now was not to talk about the airline’s huge indebtedness, but how to rescue the airline from total collapse.
“The mission is to stabilise Arik’s operations. Customers of the airline have been suffering. We just want to sustain the operations. Arik is a national pride. This is a rescue mission,” he said.

Also, Captain Ilegbodu said that their mission in Arik was to bring efficiency to the airline.
He said there was a lot of work to be done to stabilise Arik Air, to ensure safety and bring the flight operations of the airline to normal.

Arik Air is the foremost airline not just in Nigeria, but in West and Central Africa.
After the demise of Nigeria Airway, it was the first local airline to acquire brand new aircraft, making it the popular choice for air-weary Nigerian travellers.

Its fleet comprises 28 aircraft made up of two Airbus A330-200s, two Airbus A340-500s, nine Boeing 737-700s, four Boeing 737-800s, one Bombardier CRJ1000, four Bombardier CRJ900s, one Bombardier Q400s, and two Hawker 800XPs.
Of the 28 aircraft, the airline operates 26 while two are on charter to third parties.