AMCON February Takeovers: Like Aero, Like Arik?

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The announcement that Nigeria’s Bad Bank the Asset Management Company of Nigeria (AMCON) has taken over the management of Arik Air on Thursday afternoon, a year after it announced the same fate for Aero contractors who since September 2016 suspended operations indefinitely, has left many wondering if the fate of Arik will not be the same six months from now.

It was in this same month of February last year that AMCON dissolved the Board of Aero Contractors Airlines and appointed a Manager to oversee the daily affairs of the airline after being hit by turbulent financial crisis.

The debt management company defended the then takeover as a life-saving measure to protect the brand heritage of the airline maintaining also that it was an intervention in the public’s interest, who had established customer affinity with the airline. The same reason it advanced for Arik’s takeover.

Fast-forward to August 2016 just six months after the Aero intervention, the airline gravely announced to the world that the much expected turnaround had not happened; rather it was going on a technical hibernation from the 1st of September 2016 to fix things and had no idea when it would resume operations.

All Aero Contractors staff directly and indirectly involved in providing services were technically laid off or directed to proceed on an indefinite leave of absence during the period of non-services.

The management of the airline ensured that all passengers who had bought the airline’s tickets got their monies refunded.

Why was Aero Contractors with one Boeing B737-500 and two Dash 8 aircraft still operational, out of 11 aircraft in its fleet, forced to close shop despite the intervention of AMCON?

According to Aero Contractor’s Chief Executive Officer, Capt. Fola Akinkuotu, the economic situation in the country at the time had acted as the gale force which compelled them to totally abandon operations.

He narrated how the unfavorable economic climate had in a period of six months almost incapacitated smooth business operations.

“These factors are both internal and external environmental that made it difficult for the airline to continue its scheduled services,” Akinkuotu said.

Akinkiotu lamented how an airline that was famed for safety and timeliness had descended into the cesspit of delayed and epileptic operations and services to the public.

“These have been frustrating and embarrassing to all parties, including staff, customers and indeed all stakeholders,” he said.

“Unfortunately, the operating environment within and outside the airline have hindered any possible progress especially in the last six months when the naira depreciated against the dollar, thus making it impossible for the airline to achieve its operational targets.”

“The impact of the external environment has been very harsh on our operational performance, hence management’s decision to suspend scheduled services and operations indefinitely effective September 1, 2016, pending when the external opportunities and a robust sustainable and a viable plan is in place for Aero Contractors to recommence its scheduled services,” he added.

And so the story of Aero Contractors goes into the archives until such a time when economic conditions improve for it to return. Unfortunately the economy has continued to witness rising inflation and recession, with policy makers yet to effectively stem the slide.

And so here we are in February again and AMCON has announced the takeover of another major Nigerian airline which has been in the news constantly in recent times for all the wrong reasons.

There has been untold numbers of flight delays and cancellations sparking rowdiness and in some cases fisticuffs in the airports as passengers confront Arik air attendants and service providers, in uncontrolled outbursts of rage and disappointments.

The excuses of the airline of scarcity of aviation fuel, to lack of access to foreign exchange to pay insurers and lease providers, to various other mundane reasons had grown stale on the passengers who are only interested in catching their flights at agreed schedules to go about their own businesses.

Hence it was no surprise when AMCON wielded the same big stick it used on Aero Contractors in February of 2016, given the scenario of service failures stemming from financial turbulence – by announcing a takeover and appointment of a new management team.

This has not however gone down well with the management of the airline, as it had vowed to challenge the AMCON takeover in courts but promised not to disrupt the services of the airline while it pursues legal redress.

Should Nigerians be happy with this development? I will rather caution that everyone crosses his/her fingers and see if in the next six months the fate of Aero doesn’t befall Arik and the February dates of their AMCON takeovers is nothing but a mere coincidence and not a jinx.

It will be doom for the aviation sector if Arik should fail eventually, as it would signal the exit of the biggest premium local player in the sector.

Hopefully the reassuring words of the Minister of State for Aviation, Hadi Sirika, after the development on the intention of government to stabilise Arik’s operations, enhance its long term economic value, revitalise its ailing operations, and sustain safety standards, in view of its pivotal role in the Nigerian aviation sector would serve to allay any fears.

The Minister pledged the support of the Federal Ministry of Aviation for the new management to make Arik remain a strategic carrier, saying the intervention was in the best interest of the general public, workers, creditors and other aviation interest groups.

“All necessary steps have been taken to ensure that there would be no undue disruption on Arik’s regular business operations or activities of other stakeholders, on account of the recent changes in the leadership and management of Arik Airline,” the minister said.

Conversion into National Carrier

Now that the only local airline that has the capacity to meet the requirements of the Minister of State, Aviation, Hadi Sirika in becoming a national carrier is under the administrative authority of the government, a likely conversion cannot be entirely ruled out.

The minister in January after the Federal Executive Council meeting was quoted as saying “For me if any airline will have the capacity to deploy several aircrafts with seamless operation, non disruptive, provide the service, go the long haul, take advantage and give other international airlines a run for their money, we don’t need to get involved, it is because there is none.”

According to him, the national airline will be private sector driven project with the federal government having no hand in it noting that with the exception of Ethiopian airline it has been proven that government doesn’t do well with this kind of venture.

He said: When we came in we were very clear on our targets and goals and what we set out to achieve and we did say that Nigeria does not a national airline. The national airline will be one that the government will have no hand in; normally it can have three percent. It will be private sector led, private sector driven.

“We are going to have a national carrier, it is on course and because it is a PPP thing it has to go through IC and C, and also has to follow all the due process. So it is time consuming but I hope very soon before the end of the year we will have a very strong viable national airline.”

So whatever happens next with the takeover of Arik Air by the government, the aviation sector will never remain the same. The operating environment remains too harsh for investors to thrive and if Arik and Aero could fail others too will certainly follow suit, unless something urgent is done for the sector and the economy as a whole to insulate private sector investments.

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