Unanswered Questions as NG Eagle Berths

Aviation

Recently, Asset Management Corporation of Nigeria confirmed that it had floated a new airline, NG Eagle, which it hoped would be used to recover its huge debts in Arik, while the latter would be wound down. Chinedu Eze examines the implication of the liquidation of Arik on the aviation industry

After four years that Asset Management Corporation of Nigeria (AMCON) took over the management of Arik Air, Nigeria’s foremost carrier, the agency has announced that it had started the process of establishing another airline, NG Eagle, which is at the threshold of obtaining its Air Operator Certificate (AOC).

In a recent interview with THISDAY, Arik Air Receiver Manager, Kamilu Omokide, said in order to recover its huge debts in Arik Air, AMCON is spearheading the establishment of the airline and it hopes it would use the new carrier to recover some of the debts.

Omokide said AMCON hoped that after operating the airline for some time, it would sell it to the private sector through direct sale or through the Stock Exchange, if the federal government does not take it over.

Omokide also said Arik Air would continue to operate till the end of 2021, stating that both the NG Eagle and Arik would operate from the current Arik Air headquarters at the Murtala Muhammed International Airport, Lagos.

THISDAY also gathered from Omokide that some of the aircraft that made up the Arik Air fleet have been taken over by AMCON and handed them to NG Eagle. That is the fleet expected would be used to kick-start the airline. The remaining aircraft would be with Arik Air until the planned exit of the nation’s foremost carrier.

THISDAY investigations also revealed that the aircraft that would remain for Arik Air include the ones that have been on AOG (aircraft on ground) even as far back as 2017 and some of the aircraft that have been cannibalised and the parts used to repair the ones now among NG Eagle fleet.

This also indicates that Arik Air might not be inheriting mainly airworthy aircraft, as many of the aircraft it is currently operating, were leased and out of AMCON’s magnanimity, as the agency would be facilitating the leasing of another three aircraft for the airline. So while Arik Air would be operating largely leased aircraft, NG Eagle would be operating former Arik Air aircraft, which are mainly Boeing 737 New Generation equipment.

But Omokide made it clear that this was the only option available, if AMCON would ensure that retention of the staff and the continued stabilisation of the aviation industry.

Controversy

The founders and former management of Arik Air were not positively disposed to AMCON floating another airline. Speaking on behalf of the founders, the former Vice Chairman of the airline, Senator Anietie Okon, frowned on the fact that AMCON had taken some aircraft from Arik to start Nigerian Eagle.

“These aircraft belong to Arik and are supposed to be used to generate revenue for Arik to reduce its alleged debts. The aircraft have been working for AMCON for the past four years and the loan has not been defrayed, but rather has grown exponentially. AMCON keeps on bandying figures. It is clear that setting up another airline is only a wasteful adventure that will neither resolve the Arik issue nor make the new airline viable,” he said.

Senator Okon noted that AMCON on February 8, 2017, alleged in court that Arik owed approximately N136 billion in total and the agency moved in on February 9, “under the pretext that they needed to protect the creditors and the operation because of the airline’s strategic importance.”

“Today, four years later, these guys from AMCON are telling the country, that under their capable and caring hands, they have been able to destroy the airline operationally, destroyed its routes, and its certification, landing rights in the UK, USA, SA (South Africa), and UAE, and brazenly, added a further N240 billion on the so-called original debt. How can that be acceptable? The truth is that they malign the owners and quietly give the impression that they are helping the nation. This is a scam! Will Nigerians accept this? I believe if anybody would accept this, I am very sure Mr. President will not accept this under his watch,” he added.

A Dying Horse

From AMCON’S postulations it has become obvious that if there was no intervention, Arik would inexorably walk into the graveyard of extinction. Omokide said as much when he intoned that AMCON would operate along with NG Eagle “till the end of 2021.”

What will happen to the industry with the exit of Arik Air? So many more jobs would be lost. Although it is not clear, but AMCON may have the intention to retain the existing workers in Arik, especially the technical staff and other senior administrative staff. Even as it was revealed that Arik’s 3, 200 Nigerian staff has been reduced to about 900, including Nigerians and expatriates, AMCON still made it clear that it wanted to save the jobs of the airline workers.

THISDAY spoke to industry analysts, who said that the picture about what AMCON wished to do is still blurred. But some also said, if done well, NG Eagle would become a profitable airline.

Industry analyst and Secretary General of Aviation Round Table (ART), Group Captain John Ojikutu (rtd), told THISDAY that AMCON did not make it known that it would wind down Arik Air and wanted to know what the agency would do under its one strategic exit from the airline.

Ojikutu also wanted to know how AMCON intended to recover the debts and pay Arik creditors and whether the new airline would be responsible to the creditors and asked if the Nigerian Civil Aviation Authority (NCAA) had conducted economic audit on the airline since AMCON took it over.

“When did AMCON make it known (that it would close Arik) and to who? How has AMCON planned or decided the one-year exit of AMCON from Arik? How much of the foreign and external debts of Arik have AMCON recovered or what plans has it put in place to recover the debts or pay the Arik creditors? Would the established AMCON NG Eagle be responsible to the creditors? How much is the additional debts of AMCON Arik to the government services providers (FAAN, NAMA and NCAA)? Is AMCON’s Arik also indebted to private services providers like the ground handling companies? Has the NCAA conducted the economic audits on the AMCON’s Arik before its transformation to NG Eagle and before the issuance of AOC to AMCON NG Eagle?

“There are many questions to ask now which were not asked in 2012 when Arik and the other airlines that were less than four years in operations went collecting government intervention funds over bank debts and all collapsed within a year of the collections. The NCAA must do what the CBN and BOI did not do in 2012.” Ojikutu said.

But industry consultant and CEO of Belujane Konsult, Chris Aligbe, declined comments on AMCON, saying that he never believed in the agency and what it is doing in the aviation industry.

But in 2016, Aligbe had said AMCON lacked the competence in managing airlines. “I told you over time that AMCON has no competence in managing airlines. AMCON does not know what it takes to manage an airline and that is the fact of the matter. They cannot pretend about it. One of the problems in this country is that people know that they do not know, but they still want to behave as if they know.

“And then if you don’t recognise your weakness; your inadequacies, you cannot maximise your strength. AMCON has not recognised its weaknesses and inadequacies in airline operation and management and therefore it cannot strengthen the airline. So AMCON cannot maximise its area of strength.”

Rebirth through NG Eagle

But informed source told THISDAY that all the pitfalls that other airlines are known for would not be identified with NG Eagle, which is being “professionally put together”.

“NG Eagle is in safe hands. It is being put together by experienced people who will make sure that it will be a success once it begins operation. There is no doubt on my mind that the objective for its establishment will be realised. We are using a different template for the airline and we are sure it will meet our target. AMCON has aircraft beyond the ones they inherited from Arik Air. We may start with three leased aircraft and later add the other ones we have,” an inside source told THISDAY.

The Managing Director, Flight and Logistics Solutions, Amos Akpan, also told THISDAY that AMCON could have done things differently to ensure that Arik Air survived while they float their own airline, but from indications now, “they are killing Arik to resurrect a new airline.”

“It is not in and out thing. The value of Arik assets plummeted with speed in terms of aircraft and the hangar, which value is also limited. AMCON should ensure that Arik survives or what they are trying to do will expose them to higher risks. AMCON cannot complete this process without sitting down with the original owners of the airline. They could not find a buyer for the airline but floating NG Eagle is a risk. What is the timeframe between gestation period and recovery of investment? What sequence had they laid for the recovery of their debts?,” Akpan asked.

AMCON may have left so many questions unanswered in its bid to establish a new airline.