The Asset Management Corporation of Nigeria (AMCON) said it was willing to hand over Arik Air and Aero Contractors to their original owners if they were able to offset the debts the airlines were owing the corporation.
While noting that it took over the companies in the transport sector reluctantly because it lacked the core competence to manage them, AMCON said its intervention was to rescue the companies from going under and to also recover the debts.
Managing Director of AMCON, Mr. Ahmed Kuru, who disclosed this at the weekend in Lagosâ€Ž, said the corporation’s role in these airlines was like a rescue mission and it had no intention to manage them longer than necessary.
â€œAMCONâ€™s intervention through the instrumentality of Receiver Management was first to stabilise the operations of the airlines, put them in a position to generate positive cash flow, then resolve their debt situation through either the owners paying the debts or the sale of the companies/underlining assets.
â€œSpecifically, our intervention in Arik and Aero were intended to be value adding and non-destructive. It is noteworthy that the Corporation has adopted a similar approach to the revitalisation of Peugeot Automobile of Nigeria (PAN), which today is back to operation and assembling vehicles for the road transport sector,â€ he said.
AMCON intervened in the management of Aero Contractors about five years ago but fully took over the company in February 2016. The corporation took over the management of Arik Air in February 2017.
Kuru said at the point of intervening in Arik, the company was witnessing high spate of flight cancellations of up to 40 per cent, on-time performance (OTP) and the promptness of schedule flights had fallen to as low as 15 per cent, adding that the staff, including pilots were owed salaries, in some cases for up to six months.
â€œStaff morale was therefore understandably low. Several service providers including fuel marketers, maintenance and spare part companies were withdrawing services or were unwilling to extend credits. There were indeed significant concerns at various governmental cycles for safety and the possible impact of the collapse of the company on the economy. We are glad to report that this position has been largely arrested,â€ Kuru said.
The poor performance of the airlines was compounded by the protracted scarcity of aviation fuel that paralysed the aviation industry at that period and the recession which the country plunged into. The recession worsened the exchange rate of the naira to dollar and other major currencies, which made it almost impossible for airlines to purchase spare parts or go for overseas maintenance of their aircraft, because tickets were sold in local currency while they paid in dollars for checks, training and spare parts.
On Aero Contractors, Kuru said that AMCON succeeded in ensuring that the airline remained a going concern.
â€œWith the strengthening of its management, we have seen a refocus on the strengths and capabilities of the airline. The Maintenance Repair and Overhaul (MRO) licence has been made active. The airline in February succeeded in completing a c-check on a Boeing 737; a huge feat with a potential for savings in foreign exchange demands by local airlines,â€ he said.
Kuru said the intervention in the two airlines and others did not come without challenges, which include shareholder’s actions, lack of support by some trade creditors, some foreign lenders, and increased union demands.
â€œThe new management in Arik had to take bold decisions to downsize its operations, especially cutting down all the long haul flights, due to the losses being sustained on those operations, and the lack of equity capital to absorb the losses.
â€œAMCON is an asset management company, not a consultancy firm to run airlines. So we got professionals to do the job. They are the ones running the airlines. There were scepticism in some quarters earlier on but the narrative has changed. Nigerians are happy with our intervention in the transport sector; however, a lot still needs to be done,â€ Kuru added.