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Why Aero, Arik merger as national carrier not an option, says Sirika

  • ‘Doing so with debts, litigation would be huge mistake’

 

Former Minister of Aviation, Senator Hadi Sirika said merging of troubled and hugely indebted Arik Air and Aero Contractors to form a national airline for the country would have been a huge mistake by the government because of litigations and the over N350 billion exposure of Arik to the Asset Management Corporation of Nigeria (AMCON).

Sirika made the disclosure on Sunday while appearing on Arise TV to give an account of his stewardship in Nigeria Air that had elicited mixed reactions from the public.

Arik Air’s aircraft

His words, “Whoever must have done that must be making a huge error because as at the time Arik Air was taken over by AMCON, Arik’s exposure to AMCON was about N250 billion and Nigerian agencies under aviation were owed by Arik over N30b among others like maintenance firms, lessors, catering and so forth.”

“Arik was indebted to about N350 billion. Which company would start on the wrong footing with such huge debts? We have been vindicated on that. Arik has gone to court to take back its airline and at the time AMCON took over, only about three aircraft of Arik were flying. They had engines all over the world, aircraft held all over the world because they were owing.

“If you start using Arik and Aero put together, you are starting with litigation and we have been vindicated. So, it is a wrong idea. You have an airline that is private sector driven; 95 percent private sector and five percent to government, so that government would have a stake in it. From 1980 when the sector was liberalized, over 130 airlines that started, only seven or ten are functional or still alive. Kabo, Okada, Sosoliso, Chanchangi, Bellview, ADC, First Nation, IRS, name it, they have all completely gone down the drain.”

Arik Air was in February 2017 taken over by the Federal Government under the auspices of AMCON as a result of a whooping debt profile of over N300 billion.

The assets management firm at take-over of the company noted that the situation was so bad that only nine aircraft out of the 30 in the fleet of the airlines were operational.

According to the firm, 21 of them have either been grounded, gone for C-check in Europe, or facing other challenges.

Aero Contractors’ B737-500 aircraft

Not a few believed that AMCON has a reputation for ruining all the businesses it has taken over. An example is Aero Contractors, which has about nine aircraft when it was taken over in 2012, but which now has only three aircraft that are airworthy.

Besides, they said that the government has never run a successful airline in Nigeria, so using Arik to establish a national carrier may not be in the interest of the airline and the Nigerian public, as long as the government has a substantial shareholding in it.

The Minister slammed some members of Airline Operators of Nigeria (AON) who went to court to challenge the setting up of Nigeria Air, saying it was their right to do so but explained that the action was orchestrated because of the carriers’ selfish interest.

He said their fears were misplaced, stressing that Nigeria Air was not going to be conferred with an undue advantage over the existing airlines.

According to him, “Perhaps, their fear is that they think that the airline will take advantage because the government has a stake in it, they feel they will be given tax-free. There is not going to be any advantage given to this airline. I personally invited every single one of them. This is the first time in Nigeria that you have a well-structured airline and a clear business case not owned by one man but going to be owned by people who are professionals who know how to run airlines or businesses. At the beginning of liberalization of the sector, we had Kabo, Okada, Chanchangi, Harka, ADC, and the rest; 130 airlines, all of them down the drain.”

He explained that what happened on the day the aircraft came in was a marketing strategy by the shareholders of the airlines, stating that it would be an unwise decision to bring aircraft and keep them on the ground when the Air Operating Certificate (AOC) processes have not been completed.

Sirika said the promoters of the carrier took a different position from Air Peace when the airline owners acquired two B777, and kept them on the ground for more than 18 months as the two airplanes incurred huge debts on the ground.

 Sen. Hadi Sirika

“We have seen Air Peace that kept aircraft on the ground for more than three months and we have seen other airlines keep aircraft on the ground waiting to get AOC. I have also seen Air Peace, at a time, he came to us that he wanted us to permit him to go to America, China, and London: we gave him the permit to go. He brought in two B777. He was paying leases of N250,000 on each. He was paying half a million naira per month on two aircraft and he kept them for 18 months that was $9 million and did not go anywhere and by the time he was ready to start, his landing gear was due, his engines were due and depending on what is due, you will be putting aside another $10 million.

“He was starting that business with minus $19 million. Who does that? These Ethiopian people are masters of the game. They have been in the business for 77 years. Last time, they posted a profit of $1 billion. They are the only airline with Qatar that during COVID-19They can’t keep their aircraft on the ground waiting for AOC. Once they get the AOC, they are ready.

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