By Paul K. Adegboyega
The reported appeal by a group identified as “a group of local investors with stakes in Arik Air” to President Muhammadu Buhari calling for the airline to be returned to its former owners lacks both credibility and substance.
The appeal confirms that some of the individuals whose mismanagement of highly indebted firms have led to Asset Management Corporation of Nigeria (AMCON) intervention have no sense of remorse or responsibility for their terrible handling of the affairs of the companies in question.
The public appeal to the President is allegedly based on their position that the takeover of Arik by AMCON is “an illegal and ill-advised move,” which has left the airline in significantly worse shape.
The “Arik local investors” also stated that the takeover by AMCON has stymied their efforts to persuade foreign investors to put money into the airline because the airline is no longer considered an attractive proposition offshore.
The group also claims that the process that culminated in the takeover of Arik was “unlawful” because the funds used to set up the airline were offshore loans that were “merely guaranteed” by local banks.
As anyone familiar with the history of Arik Airlines and the circumstances in which AMCON took over the distressed airline can testify, the claims by this group are false and misleading.
The facts, which are in the public domain are clear. If the AMCON intervention had not happened, chances are Arik would not be existing today. The airline, which accounted for about 55% of local commercial capacity was sinking under a plethora of punishing problems when AMCON took over. It owed about N300b in debts. This includes the sum of $78million owed the International Air Transport Association (IATA), which led the global body to suspend it from its Billing and Settlement Plan (BSP) and Cargo Account Settlement System (CASS).
Beyond these significant challenges, Arik had other serious issues. The airline was also in debtor to its fuel suppliers. It had not paid staff salaries for months. Also, out of the almost 30 aircraft in the airline’s fleet, less than 10 were serviceable, there were nor reserves for usually high valued engine overhauls, which were falling due, which compelled the new management led by a respected aviation expert Captain Roy Ilegbodu to reduce its routes and flight operations after the takeover. Incredibly, Arik had no audited accounts of financial operations carried out in 2015! They also owed the auditors.
Apart from poor corporate governance characterized by lack of due diligence procedures, the pre-take over management of Arik Air also exhibited a penchant for taking appalling decisions, which left the airline in a bad position. One of such decisions was the purchase of two A340 planes for $268million (N104b), which became obsolete within four years. This was a sad product of poor due diligence by Arik and its banks.
As AMCON MD Ahmed Kuru explained some time ago, “So, even with that huge capital outlay, the two planes were not able to operate to generate the money to service the huge debt, not to talk of making profits. This is just one of the many bad cases”.
The “local investors” who recently wrote the open letter to the President conveniently left out an important detail out of their open letter to the President. Contrary to the impression they tried to create, AMCON did not barge into Arik and forcibly acquire the airline. Before the takeover by a Receiver Manager became inevitable, the Corporation did all it could to support the management so that the airline could stand on its own feet. AMCON provided loans of over N23 billion to support growth, fleet overhaul, job retention and job creation. It was only when the airline failed to repay the loans despite the generous measures that AMCON appointed the Receiver Manager to manage it to ensure the objective of saving the airline is not compromised.
Despite the challenges they met on ground, business started picking up not long after the appointment of the Receiver Manager and new management team. For instance, before AMCON’s intervention, the On-time Performance (OTP) of the airline had fallen to 19%, but after the takeover, the OTP climbed up steadily and currently averages nearly 70%, while cancellations, which were as high as 40% as at January 2017, has been significantly reduced to less than 4%. Average load factor currently over 73%.
Apart from stabilizing the airline, tightening up lax processes and introducing much needed efficiencies at all levels, the new Arik Air management also saved over 2000 direct jobs, which would have been lost when it took over. The challenges of the dreaded coronavirus (COVID-19) pandemic have led to some pruning of the workforce recently but the fact is that if the takeover had not taken place, the job situation and other aspects would be much worse today.
That is why the effort of the so-called Arik investors to put a negative gloss on the AMCON takeover is an assault on truth and professionalism. They are not only economical with the facts but have engaged in outright falsehood in an effort to make a non-existent case. But as Uthman dan Fodio famously said: “Conscience is an open wound; only truth can heal it”.
Actually, the appeal to the president is only the latest salvo in the war, which some powerful well connected big debtors have been waging against AMCON. Incensed by the efforts of the Corporation to ensure that they do not get away with their economic crimes against the country, these elements are running a campaign of lies and half-truths while posing as angelic empire builders who have been brought down by AMCON.
As part of their strategy, they have sought to portray the significant positive outcomes achieved by AMCON takeovers in negative light. Like the previous efforts, the current efforts to elicit public and presidential sympathy is doomed to fail because truth is constant and the positives of AMCON’s legally sound, strategic and beneficial interventions cannot be dimmed by this malicious and false campaign.
- Adegboyega is a public policy analyst