LAGOS – As the crisis between the owners of Arik Air and the Asset Management Corporation of Nigeria (AMCON) degenerates, the National Union of Air Transport Employees (NUATE) has said that the total debt of the airline at takeover was N180 billion.
This debt, the union insisted, far outweighed the total assets of the airline of N80 billion as at the time it was taken over by AMCON on February 9, 2017.
Comrade Ocheme Aba, the General Secretary, NUATE, at a press briefing on Monday at the Union House at the Murtala Muhammed Airport (MMA), Lagos, said that the airline was going towards bankruptcy before the intervention of AMCON.
Aba, however, said that it was necessary for the Federal Government to intervene in the current imbroglio between Sir Joseph Arumemi-Ikhide, the founder of Arik, and AMCON, warning that if the airline collapses, about 1,000 of Nigerian citizens would be thrown into the labour market.
Aba further observed that the business model employed by the founder of Arik Air exposed it to danger, insisting that the model was anathema to sustainable growth.
Aba declared that before takeover by AMCON, the airline lacked proper due diligence, needed assessment, adding that it was not also properly funded as the sustenance of the airline relied solely on the founder.
He also explained that rather than the airline to start slowly, the former owners based their aircraft acquisition on financial capacity instead of actual needs.
For instance, he said the former owners believed that “new” was better, which prompted it to acquire new generation (NG) aircraft without thought of the capacity of the market to recoup such huge costs.
Aba emphasised that the direct cause of the airline’s crisis was financial recklessness and lack of discipline, whereby the entirety of revenue accruing to the airline was seen as personal revenue and acted upon as such.
He said: “As at the time of the receivership, Arik Air was indebted to AMCON to the tune of about N180 billion, while its total assets value was about N80 billion. This clearly indicated that the airline’s debt far outweighed its assets. So, Arik was incontestably insolvent or, in more simple terms, bankrupt.
“More significantly, all indications were that the owners did not show they were aware of the enormity of the problem, nor did they display any clues as to charting any path out of the quagmire. Rather, industry watchers were dumbfounded to find that the owners, having found themselves in a deep hole, were indeed continuing to dig; discretely seeking more loans and applying resources it did not really have to elephant projects.
“This was the state of affairs that AMCON took to the courtroom to seek receivership. Our honest opinion is that the court had no alternative to granting the prayer of AMCON. And we dare say that these facts are incontestable. It was the case of a company run aground by its owners.”
Aba explained that the only two options left for AMCON at takeover was either to liquidate the airline or turn its fortunes around with the hope of eventually recouping its debt.
He said the former option would have led to loss of jobs of many technical personnel in the industry.
In a bid to resolve the crisis, NUATE called for cooperation between the owners of Arik Air and AMCON, saying that the two entities, apart from the workers had the most to either gain or lose from the state of the airline.
The union also stated that rather for the two parties to embark on legal tussle, one of the major solutions to the airline’s precarious situation was finance.
“It is absolutely clear that Arik Air cannot move one inch out of the woods without some reasonable investment, one way or another. In this regard, there are two options. There presently exists a $34 million down payment to Boeing for purchase of aircraft, which has been lying fallow since before the receivership.
“By cooperation between AMCOM and the owners, this money can be released as part of the debt to AMCON. The workers informed us that this amount can conveniently bring back five Arik aircraft that are presently out of service. This action alone will return the airline to profitable mode by which its indebtedness can continue to journey up north,” he said.
Aba further advised AMCON to relax its current stance of nil investment in the airline, describing it as counterproductive to the corporation’s chosen path of turning the carrier around.