…Insist bad bank lacks capacity to manage local airlines
How long does it take to restructure an ailing airline organisation before returning it to professional managers. That appears to be the simple question that aviation stakeholders are posing on the Assets Management Corporation of Nigeria (AMCON) after more than one year it took over management of Arik Air and Aero Contractors Airline, two of the nation’s leading carriers following huge debts and resource misalignment by their former owner-managers.
From all indications, the body language of the concerned stakeholders suggest that AMCON’s honeymoon may have ended for good since the enthusiasm that greeted its intervention in aviation industry is waning fast and it may be time to go.
The worry for some stakeholders stems from the absence of a clearly defined exit timeline by the debt recovery firm in the management of two of the airlines it took over.
Others have argued also that the inability to return Arik Air to the international market (after more than one year under AMCON receivership) is clearly an indication that the bad bank lacks the competence to successfully manage airline business.
Aviation analyst, Olu Ohunayo, who is also spokesman for the Aviation Round Table (ART), likened the intervention of AMCON in the airline industry to the “doctrine of necessity”. He told Daily Sun in an interview that it was high time AMCON exited the firms to facilitate the return of professional manager who could come as core investors or experts working in the industry .
“The intervention of AMCON was a doctrine of necessity to save the funds owned by Nigerian airlines to the banking sector, which was misappropriated by the airline owners,” said Ohunayo.
“The airlines are gradually getting their groove back. So AMCON should also prepare to handover them over to competent technical partners and investors in the interest of the flying public. And these partners will be given the responsibility of preparing the carriers for public offering where their shares can be sold to Nigerian and overseas investors on the floor of the Nigerian Stock Exchange (NSE),” Ohunayo added.
In the same light, a former spokesman of the defunct Nigerian Airways and renowned aviation analyst, Chris Aligbe, told Daily Sun in a telephone interview that with or without any push from stakeholders, AMCON ought to know that its intervention should have been designed to be simply temporary. Set out a timeline, recover the debts, and handover the companies back to their original owners or new investors.
“AMCON is aware that it does not have the competence to manage an airline because if it tries to do that, then the two airlines will die under its watch,” Aligbe warned.
“That is why it hired experts to manage Arik and Aero. But its intervention should be temporary; that is what it should be. It should not be a permanent takeover. That should be clearly defined. AMCON should be interested in the recovery of its debt and to ensure that it does not lose the money given to the airlines. Anything outside that is contestable,” Aligbe added.
It is estimated that the Nigerian airline industry could be indebted to various creditors and service providers to the tune of about N1.1 trillion, a sad trend fuelled by years of financial recklessness and mismanagement by their Nigerian owners.
According to the Minister of State for Aviation, Mr. Hadi Sirika, the airlines owe airports and regulatory authorities in Nigeria a whopping N513 billion. The figure covers debts to the Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Agency (NAMA), Nigerian Civil Aviation Authority (NCAA), and Nigerian Meteorological Agency (NIMET). On the other hand, the industry is also believed to be owing AMCON and other creditors an estimated N500 billion, with Arik Air accounting for about N375 billion of the debt.
Daily Sun learnt that apart from Aero Contractors and Arik Air that are currently under AMCON receivership, the debt recovery firm is also involved in various intervention projects in several other domestic airlines just to recover some of the backlog of debts owed by the carriers.
But despite having stabilised the operations of some of the debt-ridden airlines it intervened in, it was learnt that several pressure is being brought to bear on AMCON in recent months to return Aero Contractors and Arik Air to their original owners.
“Those who hitherto rolled out the drums to welcome AMCON intervention as timely given the need to salvage the industry from imminent collapse following their humongous debts to various creditors are now pushing for the establishment of a flight path that indicates a terminal date for the bad bank’s intervention,” an industry source told Daily Sun.
“Such push gained momentum recently following speculations that the Federal Government was planning to seize the airlines under AMCON by transfering their assets to the proposed national carrier without the consent of their original owners,” a source who preferred to remain anonymous also told Daily Sun.
Although sources close to the two airlines told Daily Sun that some concerned stakeholders have drawn the battle line and are ready to confront the government in court should an effort be made to forcefully take over the airlines and transform them into national carriers.
Aside the pressure from the owners of Arik and Aero to have their businesses back, the airline owners union appears to have come to a consensus that challenging the huge debts often linked to them as well as AMCON’s right to the continuous management of local airlines has become inevitable.
“Airline business is not a cash business; you accrue the charges and you are presented with the bills and you pay. It is easy to call numbers but it is also important to let those claiming to be owed so much to bring their bills and explain the debts,” said Nogie Meggison, Chairman of the Airline Operators of Nigeria (AON).
“Although the government cannot be held responsible for the privately owned airlines, AMCON is now competing with local airlines by running two airlines with taxpayers’ funds. AMCON has become a competitor and we no longer have a level playing field. When is AMCON going to leave the airline industry?” Meggison queried.
The airlines’ debt crisis had had dire impacts on their aircraft fleet as Aero Contractors, for instance, has had its fleet depleted from 11 to just one as at August 31, 2016 when it was shut down by AMCON for a re-engineering programme. Similarly, Arik Air had its fleet depleted from over 28 aircraft to nine as at February 9, 2017 when AMCON took over the management of the airline. While the financial crisis lasted, staff salaries and other remuneration were unpaid for months.
Analyst, Olu Ohunayo, told Daily Sun that even with the best of human expertise managing an airline business is no mean job. And it could be more than Herculean managing an airline that is in distress.
It is in this light that kudos must be given to AMCON for some of the achievements it has recorded in an effort to resuscitate Arik Air and Aero Contractors.
First, AMCON, has managed to work out modalities for keeping the jobs of the bloated staff of Arik Air in line with government pledge to the industry union not to allow AMCON sack local workers. And even in Aero Contractors where workers were initially rendered redundant and asked to go home, there has been a gradual recall of the workers between December 2017 and February 2018. There have also been successful attempts in re-fleeting the two airlines at least to enable them return to some abandoned domestic and West African routes like Ghana, Angola, Cameroon. Out of its 28 aircraft, AMCON has brought back 10 of Arik Air’s aircraft. The snag, however, remains in bringing on stream the long haul aircraft to enable it resume international routes like New York, London, and South Africa where Arik Air was flying into before the crisis that led to the AMCON takeover. For Aero, from one functional aircraft, the airline now operates four aircraft. Workers salaries are also being paid promptly.
Daily Sun learnt that the two airlines have indeed enjoyed some government’s concession under AMCON management. “The government has been giving the airlines under AMCON receivership a lot of support to survive. For instance, they are no longer harassed to pay their debts to government agencies and concessions are regularly given to them to access fuel and spare parts,” a source told Daily Sun.
“Under AMCON, the Federal Government had thrown its weight behind Aero Contractors to facilitate its establishment of a standard maintenance hangar where it now conducts C-Checks on Boeing 737-500 aircraft. This facility increases its source of revenue while also taking care of the maintenance of its aircraft at far cheaper rates then flying them to foreign maintenance plants,” added the official.
What industry stakeholders, however, would like to see is a timeline that tells when AMCON would hands-off the airlines so that they can operate independent of government’s apron strings.
“I am not sure AMCON is prepared for the acquisition and retention of any Nigerian airline as its property. It should work on a temporary basis,” said analyst, Chris Aligbe.
“If the target is to recover the debts, then it should be prepared to engage the former managers. And if they can show proof of returning the remaining debt, then AMCON should be prepared to return the airlines to them. That is the right thing to do,” he added.