Arik Air, Aero Dana, others pull out of Aviation operators shutdown
Arik Air

By OBINNA EZUGWU

Even before take-off, Nigerian Eagle (NG Eagle), an airline floated by the Asset Management Company of Nigeria (AMCON) from the ashes of Arik Air, appear to have met a dead end, stalled by the country’s aviation authorities in what many see as a clash of interest between the agency and the ministry of aviation.

When AMCON first publicly mooted the idea of floating an airline by pooling together its aviation assets in debt-ridden Arik Air and Aero contactors – which it had taken over following their inability to service debts running into hundreds of billions of naira – in January, the timeline was that it could take to the sky as early as June 2021 with about 10 aircraft.

But nearly a year later, the project has stalled, frustrated in its own view, by the country’s aviation ministry led by Hadi Sirika, the aviation minister.

NG Eagle was incorporated on July 11, 2019, with a share capital of N1 billion of which AMCON holds N499.9 million, with the rest held by private investors.

However, the establishment of an airline by a parastatal of the federal government by some interpretation is the establishment of a national carrier, and it would appear that Mr. Sirika who had been promoting a national carrier since 2017, Nigeria Air, became uncomfortable with what seems to be an attempt by another agency to do so.

Amid the controversy, many analysts had wondered why Sirika who had announced fortnight ago that Nigeria Air would eventually take to the skies early next year, albeit with borrowed aircraft, could not have simply joined forces with AMCON to convert Arik Air into a national carrier.

“Before embarking on setting up a national carrier, the first question to ask is, what is the end goal?” noted Mr. Oladipo Ajayi, head of fixed income at Chapel Hill Denham.

“I say so because I read about Rwanda Air, and noticed that the airline is not making profit. However, the end goal is to get people to visit Rwanda as a tourist economy.

“So, it’s not about the airline per say, the end goal is to get people to visit Rwanda. At the end of the day, government is able to subsidize the airline. And we have seen it play out even in the UAE with Emirates.

“So what’s the end goal for Nigeria? I would think that Nigeria wants to be the economic hub of West Africa, which it already is, although it is losing some of that to Ghana. And the reason is insecurity and lack of infrastructure. So government should focus in building infrastructure.

Ajayi who spoke to Arise TV continued, “But if the government must go that route, why not just consolidate on the AMCON aircraft? Why can’t they just nationalize those aircraft and at the end of the day, give back up?”

Ahmed Lawan Kuru
Ahmed Kuru

But it would appear that the minister has his own ideas. Speaking at senate interactive session last week, Ahmed Kuru, AMCON Managing Director, noted that NG Eagle was ready for operation but was being frustrated, and although he failed short of mentioning Sirika’s name, it was obvious he was the subject of his accusations.

Kuru took time to to emphasis that AMCON getting involved in the airline business was not from a recovery perspective, but from a national duty perspective to ensure that the airline continued to operate, given its strategic importance in the aviation sector at that time.

“After the intervention by AMCON, the airline continued to meet its obligations, particularly that of the Aviation Ministry. The airline has so far remitted over N12 billion as ongoing obligations to the ministry,” he said.

”The corporation also do realize that at certain point in time, it must prepare an exit strategy from all its aviation portfolio, and based on advice, decided to set up NG Eagle through the process of certification by Nigerian Civil Aviation Authority (NCAA).

“It was a very vigorous process that took us more than two years. Ultimately, we were able to meet all the requirements, including getting three aircraft branded and ready for operation but we are being frustrated.”

Sirika had announced two weeks ago that the Nigeria Air, which was first mooted in 2017, but was suspended after huge sums of money was expended on consultancy and logo design, will now begin operation in April 2022 to be run by a company in which the Nigerian government will hold a five percent stake, while Nigerian entrepreneurs will hold 46 percent and the remaining 49 percent to be reserved for yet to be assigned strategic equity partners, including foreign investors.

It is not yet public knowledge who the local and foreign stakeholders would be, and whether there is an interest on the minister’s part. Perhaps with this in mind, Kuru made sure to emphasis that NG Eagle is not another attempt to launch a national carrier by another government agency.

“NG Eagle is not a national carrier,” he continued. “We have no business with that. We are only concerned with recovering our money, but first we were told that NG Eagle sounds too much like a national carrier. We reminded them that they had issued license to United Nigeria Airlines, and somehow that one does not sound like a national carrier to them.

“We are also aware that based on the NCAA Act, the only condition for NCAA to deny anyone a license to operate an airline should be based on safety reasons, which would be investigated and brought to the attention of the applicant for fair hearing.

”Suddenly we are again being confronted with the challenge through the National Assembly that the license should not be released until AMCON settles Arik debt with NCAA, this we believe is an afterthought.”

Aviation Minister, Hadi Sirika
Hadi Sirika

But Kuru’s submission is his, and AMCON’s own side of the story. After AMCON took over Arik in February 2017, the Airline’s Receiver Manager Mr. Oluseye Opasanya (SAN), had in an affidavit filed in support of the airline’s receivership by AMCON before Justice Muhammed Idris of a Federal High Court in Lagos, said the airline was indebted to its trade and finance creditors to the tune of N375 billion.

Kuru had also told the senate at the time that the troubled airline was owing AMCON N147 billion; Standard Chartered, Zenith Bank, Eco Bank and Access Bank a total sum of N165 billion, while its foreign debts stood at $81 million and dent to federal government-owned aviation agencies and regulators N26 billion.

He had further noted that the airline also owes European aviation agencies and service providers $11 million, in addition to the $20 million owed Lufthansa Technik, even as over 2,000 staff were owed seven months’ salary arrears, and pilots were equally owed five months salaries, and noted that despite having 30 aircraft, only 10 were operational.

He had, however, assured that negotiations were ongoing on how to immediately resolve the arrears. But it would appear that the agency opted to go ahead and float another airline out of Arik, and went ahead to repaint Arik aircraft to NG Eagle colours without settling the troubled airline’s liabilities, which led to agitations by some stakeholders. But this may not entirely explain the refusal to grant license to the ‘new airline.’

In early October, trade unions in the aviation industry complained about what they described as asset-stripping of Arik by AMCON to start NG Eagle. In particular, the Association of Nigerian Aviation Professionals (ANAP) and the Federal Airports Authority of Nigeria (FAAN) branch of the National Union of Pensioners (NUP) wrote a petition to the House of Representatives Committee on Aviation alleging that AMCON transferred assets of Arik, under its receivership since 2017, to NG Eagle in order to evade paying Arik’s debts.

The petitioners said AMCON acquired Arik Air properties and decided to change its name to NG Eagle to evade payment of the monumental debts owed to all the aviation agencies by Arik, and that the agency had for the past four years taken over Arik Air on receivership due to its insolvency.

They further alleged that AMCON changed the livery on Arik Air Aircraft to NG Eagle which showed that it has fully acquired Arik Air assets but wanted to abdicate its liabilities through the change of name.

ANAP and NUP thus solicited for the House intervention, stressing the need to restrict NCAA from issuing Operators’ Certificate (AOC) to Nigeria Eagle Airline with a view to avoid a repeat of what happened in the case of Bellview Airlines which transformed to First Nation Airways and the aviation agencies ended up losing billions of naira owed by the defunct Bellview Airlines.

AMCON was said to have also failed to service debts the airline owed to Bombardier, put at $47 million. This was balance payment for the acquisition of two CRJ 1000 aircraft and four Dash 8 Q400 aircraft.

Following the petition, the House Committee directed NCAA to put on hold the issuing of AOC to NG Eagle and resolved to investigate the alleged plan by AMCON to float the airline with Arik assets and ascertain the true situation and ensure that the aspect of the liabilities is duly resolved.

The committee chairman, Nnolim Nnaji had noted that, “If truly AMCON is taking over the assets of Arik Air and handing them over to another legal entity, the aspect of liabilities must be addressed so that public funds are not lost.”

The Senate Committee on Aviation also intervened On October 14, following ANAP and NUP petition and ordered NCAA to suspend the process of awarding the AOC to NG Eagle.

The committee had in a letter signed by its Chairman, Senator Smart Adeyemi, said the order was to enable lawmakers investigate issues surrounding the controversial carrier.

AMCON, however maintained in at a meeting with the House Committee that it would not pay aviation agencies N9.6 billion and $2.3 million (totaling N10.5 billion), being five per cent ticket and cargo sales charge owed by Arik when it took over because the debts were unsecured.

The agency blamed the aviation agencies for allowing the debts to pile up without insisting on collecting them or grounding the operations of the airline.

AMCON argued through the Receiver Manager of Arik, Omokide Kamilu Alaba, that it was presently the owner of Arik Air, having bought over debts owed by the airline, which it put at over N300 billion, insisting that it would only pay post receivership debts.

AMCON NG Eagle Arline
NG Eagle

Alaba explained that AMCON decided to establish another airline, NG Eagle, as a non-disruptive exit plan, noting that the airline would be owned 100 per cent by AMCON and would be a publicly owned carrier with the Ministry of Finance and Central Bank of Nigeria (CBN) as majority shareholders.

According to him, Arik Air would not be under receivership forever, so the exit plan was to establish another airline, as litigations that might follow Arik Air might not allow it to be operated successfully.

He said the airline would only operate domestic services to avoid international litigation and possible seizure of its aircraft

AMCON put the assets of the company to over N150 billion, which was against $3.7 billion that was the audited assets of the company by late 2016 by Deloitte of London which had audited Arik Air under the old management, few months before AMCON took over the company on February 9, 2017.

Affair Turns Political

As the NG Eagle controversy raged, however, it became obvious that at the heart of it is a clash of interest between the two government entities involved: AMCON and Aviation ministry over a national carrier.

While AMCON has maintained that it’s proposed airline is not a national carrier, Aviation ministry perhaps doesn’t want to accept that an airline whose name is Nigeria Eagle, painted in Nigerian colours and owned by government parastatals, is not an attempt to set up a national carrier.

Soon the clashing interest became obvious to even members of the national assembly, and around October 20, the Senate Committee on Aviation, made a U-turn on and asked NCAA to award AOC to NG Eagle airline.

The committee, at the opening of the 50th yearly general meeting (AGM) of the Nigerian Air Traffic Controllers Association (NATCA), in Abuja, said it had been misinformed, even as it added that the lawmakers frown at political interference in the affairs of the NCAA.

Member of the Senate Committee on Aviation, Senator Ibn Na’Allah, said the committee was misled on the controversial issue of NG Eagle’s AOC and apologised to Nigerians.

Na’Allah urged the NCAA to go ahead with its duties and perform its statutory functions, as the regulator, without interference.

But NCAA is under the control of Aviation Ministry, and Sirika maintained that the over N235 billion debt owed by AMCON corporation may not allow NG Eagle to be certified by the civil aviation authority. According to him, NCAA would not likely give AOC to NG Eagle while these huge debts remained unresolved.

Last week, at an interactive session in Minna, matters came to a head. Chairman of Senate Committee on Banking, Insurance and other Financial Institutions, Senator Uba Sani, lashed out at Sirika, noting that the proposal by the Aviation Minister was not in the interest of the aviation sector and the country in general.

Sani alleged that the aviation ministry frustrated AMCON’s efforts to float Nigerian Eagle. He said the new airline would have dovetailed into the nation’s national carrier to replace the defunct Nigeria Airways, especially after Virgin Nigeria failed four years into its operations.

However, the Aviation Ministry maintained its innocence, dismissing the Senate committee’s claim that it was frustrating AMCON from floating NG Eagle.

“NCAA is in charge of issuance of AOCs, and also regulates the operations of airlines, not the Ministry,” said the Director, Press and Public Affairs, Aviation Ministry, James Odaudu.

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