Arik, Aero Contractors May Be Converted Into National Carriers By FG

The Asset Management Corporation of Nigeria (AMCON) is considering the merger of Arik Air and Aero Contractors to form a national carrier, according to AMCON’s Managing Director and CEO, Gbenga Alade. During an interactive session with media executives in Lagos on Monday, Alade explained that both airlines are struggling with significant debt burdens that they are unlikely to repay, prompting the need for a drastic solution.

Alade revealed that the idea of converting Arik and Aero Contractors into a national carrier had previously been proposed to the former Minister of Aviation but was rejected. Despite this setback, AMCON believes that merging the two airlines remains the best option and intends to present the idea again. Although the special purpose vehicle (SPV) initially created for this purpose was sold, Alade noted that AMCON could create another SPV to facilitate the merger.

This discussion comes in the wake of ongoing controversies surrounding Nigeria’s national carrier, Nigeria Air. The airline was launched by former Minister of Aviation Hadi Sirika just three days before the end of former President Muhammadu Buhari’s administration. However, the project has faced criticism, particularly over its ownership structure, which gave Ethiopian Airlines a 49% equity stake, while the Nigerian government retained only 5%, and a consortium of Nigerian investors held 46%.

In June 2023, the House of Representatives called for the suspension of Nigeria Air’s operations, labeling the project as fraudulent. Subsequently, in August 2023, the current Minister of Aviation, Festus Keyamo, announced that the national carrier project was suspended until further notice, arguing that the airline was essentially an Ethiopian Airlines operation disguised as Nigeria Air.

Recently, a Federal High Court in Lagos declared the sale of shares in Nigeria Air to Ethiopian Airlines null and void, effectively halting the Federal Government’s plans to establish the national carrier. The judgment was delivered in favor of the Registered Trustees of the Airline Operators of Nigeria and other aviation stakeholders.

Alade expressed that the dire financial situation of Arik Air and Aero Contractors is causing him significant concern, particularly the debt owed by Arik Air, which includes a $52 million liability to Afreximbank. Despite negotiations, Arik could only offer $8.5 million to settle the debt, leaving AMCON to explore other options, including providing a bank guarantee to prevent the seizure of Arik’s assets, which would otherwise cripple the airline’s operations.

Arik Air has faced several legal challenges, including a recent grounding of its aircraft by the Nigerian Airspace Management Agency (NAMA) due to a court order obtained by billionaire businessman Arthur Eze, a creditor owed $2.5 million by the airline’s founder, Johnson Arumemi-Ikhide. Aero Contractors has similarly been under AMCON’s management since 2016 due to its inability to meet debt obligations.

In addition to addressing the challenges in the aviation sector, AMCON is also focusing on broader asset recovery efforts. Alade announced plans to engage international asset tracers to recover nearly N5 trillion in outstanding debts, including assets hidden offshore by recalcitrant debtors. Since the new management took over five months ago, AMCON has recovered approximately N100 billion from high-profile debtors and reviewed the sale of some assets.

Alade emphasized the importance of resolving issues in the oil, gas, and power sectors, noting that doing so could boost production, generate foreign exchange, and create employment opportunities. He also highlighted AMCON’s efforts to revive dormant assets in the telecommunications sector, aiming to bring them back into operation.

The AMCON CEO expressed confidence that with continued support from the government, the Central Bank, and other stakeholders, the corporation would make significant progress in its asset recovery and national development efforts.