Arumemi-Ikhide: Acquisition of Arik in 'Commando Style', Bad Signal to Investors

  • Says AMCON cooking up debt figures to justify Arik take-over Blames weakened naira for debt profile
    Chinedu Eze

Founder of Nigeria’s biggest carrier, Arik Air, Joseph Arumemi-Ikhide, has said the take over of the airline by the Asset Management Corporation of Nigeria (AMCON) in a “commando style” was a bad signal to investors.

Arumemi-Ikhide also accused AMCON of cooking up debt figures to justify Arik take over.
Speaking exclusively to THISDAY, He said it was wrong for an entrepreneur to labour and build a business and government would come and take it in “a commando style”.

AMCON on February 9 took over the management of Arik Air over mounting debts that it (AMCON) claimed would have grounded the operations of the airline without the corporation’s intervention.
AMCON had put Arik’s total debt profile at more than N300 billion and accused the airline of lacking corporate governance.
But Arumemi-Ikhide said the debts owed by Arik were far less than the N300 billion AMCON alleged.
He argued that contrary to the N146 billion AMCON said Arik owed the corporation, the actual debt was N90 billion.

According to him, AMCON management had acknowledged that N90 billion was the debt the airline owed the government agency and wondered where it got the extra N56 billion it added to the earlier debt, which both parties agreed on and endorsed.
He argued that AMCON’s claim that the additional figure was the interest on the original debt did not hold water because AMCON “is not a bank or any kind of financial institution.”

The Arik Air founder said that in addition to AMCON’s debt, the airline owed Zenith Bank N35 billion, Access Bank N7 billion and Ecobank N12 billion, bringing the debts to N140 billion.
Other debts he mentioned include debt owed Lufthansa Technic, a maintenance company that provides technical support to the airline, which is about $9.8 million, and the one owed Eurocontrol, which the he said was less than one million Euros.
He noted that catering services, debts from aeronautical charges, including the debts owed aviation agencies like parking and landing charges, terminal charges, en route charges and extension of time at the airports that are not manned for 24 hours, were about N10 billion.

Noting that although Arik had been paying its debts to the Federal Airports Authority of Nigeria (FAAN), he said the bone of contention was that the agency presented conflicting debt figures which led to a disagreement that ended in court. He however said it was FAAN that took Arik to court.
Speaking further on the debt profile of the airline, he said the huge debts to Arik’s international creditors were as a result of the depreciating value of naira. Buttressing his point, he said last June when the naira plunged in value, the amount of naira required by the airline to service its debts in dollars almost doubled.

Arumemi-Ikhide said this prompted Arik to instruct Zenith Bank to set aside some of the revenue it earned to service the debts but when the value of naira nosedived further, the money set aside could not offset the required payments to US Exim Bank, lessors and others.
He said the projections and funding were calculated on N165 per dollar but from the middle of last year naira went down to N305 per dollar at official rate. This, he said, made it extremely difficult to keep pace with the payment, especially with increase in the price of aviation fuel, which stretched the finances of airlines

“AMCON does not know what it is talking about. They are there cooking up figures to justify their impunity of using commando style to take over the company. If they meant well they would have approached us and state their intention and we reach agreement without these crisis and fanfare. If you want to take over, first you do inventory to know what is in the company,” he said.

Arumemi-Ikhide said the day AMCON took over the management of the airline, Arik operated 65 flights with 15 aircraft but since the take over, the airline has been operating maximum of 15 flights.
He said the airline was operating about 110 flights daily before the scarcity of aviation fuel and now it operates less than 16 flights daily.

Noting that the lessor, Penbrook, which owns the leased planes, had contacted their lawyers to go to court, he said he would also go to court.
Commenting on the airline’s fleet, he said the 28 aircraft in the fleet of the airline include two executive jets and 26 schedule services aircraft. Out of that 26 two are classics, while two are Airbus 340-500, making the total number of aircraft in schedule operation 22.

“One of the Airbus 340-500 was leased to a company in Spain; one has been parked at the international terminal of the Lagos for over two years now. Out of the Airbus 330 we leased, one has gone for C-check, while the other one has engine problem,” he explained
He noted that it was a good decision AMCON made to stop international operations because if any aircraft belonging to any airline that government has interest in is taken abroad, creditors owed by the defunct Nigeria Airways Limited (NAN) might seize the aircraft.

“They may seize the aircraft in London because NAL owed a lot of money to many organisations. When we started flights to London the first challenge that we faced was to explain to them that Arik is a privately owned airline,” Arumemi-Ikhide said.
He said the plan by government to invite Ethiopian Airlines to manage Arik had failed. He warned that if Ethiopian Airlines dares to take over the management of Arik , he would sue the company.