•Continued from last week
“This is how they have been running the place and these were some of the things we met on ground.
“The first thing we did when we moved in was to address the payment of staff salaries. Remember, some of them were owed up to seven months. The staff members have expressed satisfaction with what we have done.
“We are hopeful that with an annual profit of about N7 billion, and if the monies are not laundered, I think we can pay back the loans in time. The AMCON debt is about N147 billion. There are local banks which Arik Air is owing about N165 billion. These banks collect all the monies they make.
“The issue of converting the airline to a national carrier is not on the table. Arik is too complicated to make a national carrier. The total asset worth of the airline right now is less than N40 billion.
“The government does not have plans to do that. The interest of government is that we must continue to fly and people must work. They have about over 2,000 employees.
“They do not need more than N10 billion to stabilise their operations. Within the next three months, they will be able to pay back what we have put in right now. In national interest, Arik Air should be allowed to fly.
“We are thinking of suspending international flights. Arik Air needs about N1.6 billion to buy fuel for international routes. We cannot do that right now. By the time we manage it for about six months, the airline can now survive and then, we can sit down and talk about where to go from there.
“Based on what we have achieved in just one week, we are hopeful that in the next three weeks, the issue of delayed or cancelled flights will be things of the past.
“We are carrying everybody along. At the end of the day, we want to return it to profitability. We need to emphasise one fact – that the only way we can recover our debts is for Arik Air to continue to fly. The banks have come to realise that this is important.
“The government has a responsibility to ensure that it intervenes whenever there is any threat to national interest. Within the next 30 days, we will be going to places we have not been to in the last three years.”
Observers said that a lot of positive developments have returned to the airline barely two weeks after the AMCON took over Arik Air’s management.
The challenges created by the airline’s former management, have been surmounted the Capt. Roy Ukpebo Ilegbodu management, under the receivership of Mr. Oluseye Opasanya.
Tumba said: “Nigerian banks that hitherto turned their backs to Arik are now cooperating and supporting the new management; engagement with international and local creditors have also been successful; just as discussions with critical service providers and industry stakeholders have yielded the much desired positive results.
“Arik Air has also paid the insurance premium, which was on the verge of expiry had the AMCON not taken over on February 9. The airline has also commenced the payment of outstanding salaries, which has greatly boosted staff morale as well as performance.
“The airline is also in discussion with different creditors and stakeholders to recall a good number of aircraft into the fleet as soon as possible, which will increase the number of daily flights.
“Aside from that, a good number of affected passengers have been refunded and efforts are on to reach out to those yet to get their refund as a result of suspension of flights to some routes.
“As a result of these positive developments, customers of Arik Air, especially from the corporate circle, are gradually coming back with assurances of stable and professional management with improving performance record within a short period, which is buoyed by the fact that the airline has an unparalleled safety record that speaks for itself in the history of aviation in the country.
“The new management of the airline under the auspices of the AMCON has held series of fruitful engagements with major suppliers of aviation fuel (ATK), and agreements reached for regular supplies of the product to Arik, which has guaranteed regular flights.
“They said that incompetent people are running the organisation, yet Arik Air has no financial account since 2015, has not paid taxes or remitted staff pension deductions for over two years and new debts are popping out every day. A clearer picture will come out after KPMG forensic audit report in the next 12 weeks.”
The beginning of the end
Arik Air sailed into trouble water for its failure to service the non-performing loans it acquired in 2011 from two distressed banks, which were taken over by agency.
The N85 billion loans were acquired include: N17 billion from Union Bank Plc and N14 billion from Keystone Bank Limited.
A source hinted about the airline’s exposure: “The facilities were granted to Arik Air for purchase of additional aircraft and to refinance existing term loans. The default in repayment by Sir Johnson Arumemi-Ikhide, the principal promoter of Arik Air posed systematic threat to the banks and indeed Nigerian economy.
“As a matter of fact, apart from the AMCON, Arik Air is also currently indebted to other commercials including Standard Chartered, Zenith Bank, Ecobank and Access Bank to the tune of about N165 billion.
“Arik Air owes the federal aviation agencies and regulators N26 billion. $11 million is owed to European aviation agencies and service providers $20million owed to Lufthansa Technique.
“In September 2011, the agency, in a bid to provide further support to Arik Air restructured its debt from N85 billion to N70 billion as a nine-year term loan, running at 12 per cent per annum. Other terms of the restructure include the following:
- The AMCON to appoint a resident monitoring manager who shall have the authority to call for any of Arik’s records for examination;
- Arik to provide three-year record of its remittances to FAAN.
“In all of these, Arik Air defaulted on the term of the restructure and failed to make the monthly repayment as agreed. Again in May 2013, the agency sourced N26 billion of the Central Bank of Nigeria (CBN) Power Aviation Intervention Fund (PAIF) through the Bank of Industry (BoI) on behalf of Arik.
“The AMCON disbursed N21.38 billion of the BoI loan to Arik as working capital. Out of this amount, N21.4 billion was meant for reconfiguration of two aircraft from passenger to cargo carriers.
“This was never done as the funds were diverted by Arik management and is now the subject of Economic and Financial Crimes Commission (EFCC) investigation. Both aircraft were abandoned in the United Kingdom (UK).
“In December 2015, due to the accrued interest and unpaid principal, a second restructuring was proposed for Arik Air’s debt to reduce the debt from N138 billion to N90 billion, which is awaiting CBN approval.
“This was proposed based on the airline’s plan to do a private placement and subsequently do an IPO within a period of six months. Based on that, they were expecting N44 billion from Afrexim as a bridge. None of this happened as Arik Air could not comply with any of the conditions given for a peaceful resolution.
“In spite of the leniency, good will and good faith demonstrated by the AMCON to support an indigenous strategic business; Arik Air, throughout the negotiations, refused, or neglected to adhere to the terms of amicable settlement.
“However, the agency continued to bear the burden of repaying the Bank of Industry (BoI) loan at one per cent interest rate without any corresponding commitment from Arik. So far, the AMCON has paid N9.05 billion on behalf of Arik.
“Arik Air vehemently refused to cooperate with the AMCON resident monitoring manager. It refused to disclose financial information to the agency. Of all our investments in Arik, AMCON total recoveries from Arik till date is N4.6 billion, which is only 3.2 per cent of current exposure. The total repayment by Arik in the last 12 months is N50 million.
“As part of its support for the ailing aviation industry, the AMCON opened fresh talks in January last year with the airline towards a new settlement agreement based on its planned recapitalisation. There was an agreement on new restructuring terms, subject to CBN approval.
Included in the terms are: N3.3 billion monthly payments from Arik Air sale; N13 billion Afrexim guaranteed loan; and N20.0 billion from Arik’s planned private placement.
“But Arik did not keep its end of the bargain with the conditions unfulfilled.”
Investigations showed an improvement has been recorded on the performance on Arik Air’s “Golden Triangle” routes of Lagos – Abuja – Port Harcourt.
According to statistics, on time performance on the airline’s other domestic routes and the West African Coast has improved by about 78 per cent in the last one week.
A source claimed that on time performance dwindled under the former management because of its inaccessibility to aviation fuel, arising from huge debts to all fuel marketers.
The source alleged: “In the past, Arik Air flights were delayed because their managers’ indebtedness to fuel marketers, who were unwilling to supply on credit.
“There were no spare parts in the store. Insurance cover was almost expiring and workers’ salaries were unpaid. All these impacted on the operations of the airline.
“But, under the AMCON appointed management, the airline is running smoothly, we have secured the confidence of our suppliers and vendors and the airline is running better than when the old team was there.”
•Concluded
