WAY OUT OF ARIK AIR DEBACLE

All the stakeholders, including AMCON, should sit at a table to decide the way forward

Last week, the Asset Management Corporation of Nigeria (AMCON) announced the takeover of Nigeria’s largest carrier, Arik Air, with a claim that it wanted to save the airline from collapsing and to ensure that over 3000 workforce in the company did not lose their jobs. The action was predicated on a court order which gave AMCON the power to do so, considering the huge debts Arik Air owed the federal government agency, put at around N135 billion.

Justifying the takeover, AMCON said that Arik Air has been in a precarious situation largely attributable to its heavy financial debt burden, bad corporate governance, erratic operational challenges and other issues that required immediate intervention in order to guarantee the continued survival of the Airline. But many industry stakeholders have misgivings about the action of AMCON for several critical reasons.

One, AMCON has a reputation for ruining all the businesses it has taken over. 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, 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 government has substantial shareholding in it.

Two, many also have seen the forceful takeover of Arik more as a disincentive to private investment in the country. It was reported that Deloitte of London five years ago placed Arik assets at $4.3 billion; but all the debts owed by Arik is still less than 50 per cent of its assets and therefore the forceful takeover of the airline could be described as illegal. So what was expected is for all the creditors, including AMCON to sit at a table to decide the way forward for the airline, rather than the current approach that could end up killing the airline.

Three, Arik Air’s safety certification included European Aviation Safety Agency (EASA) which enabled it to fly to any country in Europe; advanced level of the International Air Transport Association (IATA) Operational Safety Audit (IOSA), known as Enhanced IOSA, which enabled it to code-share or interline with any airline in the world. It is also the only Nigerian airline that has Part 129, which allowed the airline to fly to the US with Nigerian registered aircraft. Such goodwill will be lost with the action AMCON has taken.

Four, the International Air Transport Association (IATA) has suspended the airline membership; which means it cannot use Billing and Settlement Plan, which is a payment platform for airlines that provide network and facilitates payment from any part of the world. By suspending Arik, IATA has indicated that the action AMCON has taken may not be in the best interest of the airline and possibly, the association may be seeing a bleak future for the domestic carrier, which was once a beckon of hope for Nigerians.

Five, it is an open secret that the plan to take over Arik Air by the federal government was hatched about a year ago at a period some officials were toying with the idea of establishing a national airline. Although AMCON said the action was a move to save the airline, which held about 60 per cent of the domestic passenger traffic, there are questions as to whether this was the best option for the federal government.

As late in the day as it may seem, we recommend AMCON to sit down with the management of Arik airlines to fashion the way forward. That would be a better option than using military tactics to take over a going business concern owned by a private investor, no matter the justification.