Says airline now worth less than N40bn
You acted belatedly, senators tell agency
From Kemi Yusefu and Fred Itua, Abuja
One week after the Asset Management Corporation of Nigeria (AMCON) announced the takeover of Arik Air, shocking revelations have emerged on the financial state of the leading airline in the country.
AMCON had, last Thursday, announced the takeover and sack of the management of Arik Air, replacing it with a new one headed by Captain Roy Ukpebo Ilegbodu, a veteran aviation expert, under the receivership of Mr. Oluseye Opasanya (SAN), who would now manage Arik Airline
Managing Director of AMCON, Mr. Ahmed Kuru, who briefed members of the Committee on Banking, Insurance and other Financial Institutions, yesterday, said contrary to earlier claims, Arik owes AMCON N147 billion.
He said the airline also owed other local banks at least N165 billion, while the foreign debts stand at $81 million.
The AMCON boss also told the committee members that Arik owed over 2,000 staff seven months’ salary arrears, revealing that negotiations were currently ongoing on how to immediately resolve the arrears.
He disclosed that the airline, despite having 30 aircraft, only operates 10.
According to him, the distress in Arik was so bad that the airline relied on collection of ticket fees before it could buy aviation fuel, adding that the incessant cancellation and delay of flights were as a result of the airline’s inability to buy aviation fuel.
Kuru, while dismissing claims that the Federal Government was planning to make Arik a national carrier, said the airline was too problematic for any government to handle.
He said: “Despite all the things we have done to ensure that Arik Air stays in business, they have not done their part in meeting their own obligations. Arik Air owes up to seven months salaries to workers.
“They have refused to pay salaries and also refused to ensure that their loans are repaid. We could not just sit back and allow an important airline with about 30 aircraft that covers 55 per cent of all routes in Nigeria to go down. From the records, Arik makes over N7 billion annually.
“We are talking to people to acquire the airline. They came, but when they saw the records, they decided to suspend everything, pending when we resolve some of the issues.
“We have deployed people there to manage it, pending when we can stabilise it and then bring in investors to take over. We discovered that, out of the 30 aircraft of the airline, only about 10 were functional. Some of them were not in Nigeria. They failed to meet all their obligations, even the insurance payment. They did not even have money to buy aviation fuel.
“What they did was to collect money for tickets and then quickly use it to buy fuel. This is how they ran the place and these were some of the things we met on ground.
“The first thing we did when we moved in was to address the payment of salaries of staff. Remember, some of them were owed for up to seven months. The staff of the airline are very pleased with what we have done.”
Kuru expressed hope that with an annual profit of about N7 billion, the new Arik management could pay back the loans in time. “AMCON debt is about N147 billion. There are local banks, which Arik Air owes about N165 billion. These banks collect all the monies they make,” he said.
On the rumour that the Federal Government plans to convert the airline to a national carrier, Kuru said this was not on the table. According to him, “ Arik is too complicated to make a national carrier. The total asset worth of the airline right now is less than N40 billion.
“Government does not have plans to do that. The interest of government is for the airline to continue flying and for people to work and earn their living. They have over 2,000 staff.”
On what would be needed to stabilise Arik, the AMCON boss said about N10 billion was enough. He said: “Within the next three months, they will be able to pay back what we have put in right now. In national interest, Arik Air should be allowed to fly.”
Kuru said, in the next two to three weeks, the new management of the airline would put 15 to 16 aircraft back to the 18 nationwide routes, noting, however: “Arik Air cannot compete internationally now. They can’t give the kind of services other airlines have.”
He also spoke on the suspension of international flights, noting that the airline spends N1.6 billion on aviation fuel to service its 12 international destinations, which it cannot do currently.
He said: “We are thinking of suspending international flights. Arik Air needs about N1.6 billion to buy fuel for international routes. We cannot do that right now. By the time we manage it for about six months and the airline can survive, we can sit down and talk about where to go from there.
“Based on what we have achieved in just one week, we are hopeful that in the next three weeks, delayed or cancelled flights will be things of the past.
“We are carrying everybody along. At the end of the day, we want to return it to profitability. We need to emphasise one fact that the only way we can recover our debts is for Arik Airline to continue to fly. The banks have come to realise that this is important.
“Government has a responsibility to ensure that it intervenes whenever there is any threat to national interest. Within the next 30 days, we will be going to places we have not been, in the last three years.”
On their part, the lawmakers lauded the initiative of AMCON, but noted that it acted belatedly.
Chairman of the committee, Senator Rafui Ibrahim, who spoke on behalf of other lawmakers, said: “Was the take over not done rather too late? From what you have given us, this is worst than Dasukigate. It appears what is happening in the private sector is worst than that of the public sector.”
On his part, Ilegbodu, the new Chief Executive Officer of Arik, said the airline’s performance stood at 15 per cent, as against 25 per cent minimal requirement in the aviation sector.
He told lawmakers that Arik was indebted to the United Kingdom airspace management unit to the tune of €1. 6 million, in addition to another 300,000 pounds indebtedness to the UK Customs service.