Poor Management Threatens Survival of Arik Air

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Chinedu Eze

Industry experts have expressed worries that Nigeria’s biggest carrier, Arik Air may go under in the next few months and over 3000 workers directly employed by the airline will lose their jobs; unless the airline is taken over by efficient management with international experience.

THISDAY learnt that the initial plan prior to its take-over by the Asset Management Corporation (AMCON), was that Ethiopia Airlines would run the airline and provide it with technical support by taking a percentage of the company. The East African carrier was said to have withdraw from the deal when it learnt about the huge debts owed by the airline.

Industry experts opined that Captain Roy Ilegbodu, who is the current CEO of the airline might not have the requisite experience and international exposure to effectively management the airline with about 28 modern fleet, three international operations; over 10 regional flights and 18 domestic operations.

Informed sources who spoke to THISDAY disclosed that with the take over of the airline by AMCON, Arik was saved from being grounded due to the expiration of aircraft insurance, which would have stopped its operations three days after it was taken over by the federal government agency.

AMCON was said to have spent about N100 million to renew the airline’s insurance, which kept it in operation and about N5 billion was made available to the airline to ensure fuel supply, take care of the airline’s workforce and carry out immediate maintenance of the fleet, with the hope that the airline would start generating revenue.

THISDAY also reliably learnt that the US has withdrawn Part 129 certification of the airline, which enables Arik to fly to the United States with Nigerian registered aircraft.

The source also disclosed that Arik might also lose European Aviation Safety Agency (EASA) third country approval certification, which also enables the airline’s aircraft to operate to any part of Europe in accordance with a bilateral agreement with the destination country.

In reaction to the take over, the International Air Transport Association (IATA) removed the airline from the Billing and Settlement Plan (BSP).

IATA Area Manager, South West Africa, Dr. Samson Fatokun, said in a statement on Wednesday that IATA is currently working with the new management of Arik Air to resolve the airline’s suspension from the IATA Billing and Settlement Plan (BSP) and Cargo Account Settlement System (CASS) and noted that the airline’s suspension from the IATA financial systems does not affect its IATA membership or IATA Operational Safety Audit (IOSA) registered status. “Arik Air remains a member of IATA and a fully IOSA registered airline,” the statement said.

This means that until this issue is settled Arik will no more utilise the Global Distribution System (GDS) and IATA cannot guaranty cashless transaction between travel agents and the airline, so travel agents would have to deal directly with the airline and pay cash, a system that is limiting and cumbersome for the airline.

A source close to the airline said AMCON ought to urgently inform the aforementioned authorities that Arik Air merely changed management; that it was not sold to another owner, which would require elaborate procedures for recertification.

“Arik Air is not easy to manage. It needs a very experienced management with international exposure. It is an airline that has international rating and the people in charge now do not have such experience that is needed to keep the standard the airline has climbed over the years. The industry will lose so much if the airline goes under,” an inside source told THISDAY.

Industry consultant and CEO of Belujane Konsult, Chris Aligbe said AMCON should advertise for a turnaround manager who could effectively turnaround the company, noting that the airline needs an experienced management to effectively sustain its operations.

Aligbe also noted that it is not only AMCON that should now be involved with the airline, remarking that the stake holding should involve those owed by the airline, the owner of the airline and AMCON and all should be involved in deciding the future of the airline.

“The new stakeholders should constitute a board for the airline and decide on the management team, which should be openly advertised. Now that AMCON has invited KPMG to carry out forensic audit of the airline; it is good to know what the airline actually worth, but these decisions should not be taken by AMCON alone because this will mean arrogance of statutory power. Other stakeholders must be involved in critical decisions concerning the airline,” Aligbe said.