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6 years after, Arik, AMCON still in dispute

It is now over six years since the airline was taken over by AMCON but they have been long, tortuous years which raised the issue…

It is now over six years since the airline was taken over by AMCON but they have been long, tortuous years which raised the issue of the desirability of AMCON’s intervention into the aviation industry.

AMCON’s takeover of Arik Air, one of the nation’s foremost airlines which also used to be the biggest in West and Central Africa, was as a result of multi-billion naira indebtedness to banks. AMCON, during the takeover, put the debt at over N380bn, and appointed receiver-manager to manage the airline.

AMCON was created “to be a key stabilising and re-vitalising tool aimed at reviving the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy.” 

However, after six years of running the airline, the shareholders are still bent on recovering their company. This was bolstered by the recent court ruling which gave Sir Arumemi-Ikhide access to the premises.

AMCON had, in the course of managing the airline, made an attempt to set up another airline from the vestiges of Arik Air. First was NG Eagle which was to take-off using some aircraft belonging to Arik Air (in receivership). However, the new entity did not see the light of the day despite fulfilling the obligations to be granted an Air Operator Certificate (AOC). 

Another move by AMCON to set up another airline with the equipment of Arik Air did not go down well with the Arik Air shareholders who alleged undue and illegal conversion of assets belonging to the airline.

In 2021, Arumemi-Ikhide, and his wife, Mary Arumemi Ikhide (plaintiffs), filed an originating motion dated December 14, 2021, at the Lagos Division of the Federal High Court, challenging the decision of the receiver-manager to transfer some of the assets of Arik Air to NG Eagle.

They prayed the court that the duty imposed on the receiver-manager, Kamilu Omokhide (first defendant) by Section 553 of the CAMA 2020 to act in the best interest of Arik Air Limited as a whole, includes the duty to act in the best interest of the plaintiffs (Arumemi and Mary Ikhide) as members of Arik Air Limited.

The court granted the prayers of the plaintiffs and asked AMCON to render accounts of its management of Arik Air under receivership. The judgment has been appealed by AMCON.

The Managing Director of AMCON, Mr Ahmed Kuru, however, stirred the hornet’s nest recently during a press conference where he gave conditions for Arik Air owner to recover the airline.

He said, “Our doors are always open to resolve debts because that is our primary function and aside from our recovery mandate, AMCON does not have a secret agenda.

“So, the challenges of the founder of the airline to recover his airline might seem difficult, but not irredeemable, however, there is always a way out of every situation.

“There must always be a situation of give and take and AMCON is now ready to sit down with the owners of Arik, if they are ready to agree on what is good for them and the federal government.

“When we engage and arrive at an agreement, we will go back to the Central Bank of Nigeria as well as the Ministry of Finance and share such a resolution strategy with them.”

But the Arik Air shareholders faulted the statement, accusing the corporation of mismanaging the airline and depleting its assets and resources over the period it has been in charge, claiming the airline now operates only two aircraft from 17 aircraft inherited.

“The Arik Hangar in Lagos is now a static display of 14 abandoned new generation aircraft while the rest have either been cut to pieces, sold, and shipped out of the country. The spare parts inventory of Arik valued at over $150 million has been significantly depleted to less than $15 million.

“About 80 per cent of domestic routes have been shut down while all West Coast, African and intercontinental routes of London, New York, etc have all been shut down completely after three months of operation by AMCON in 2017. In addition, over 3000 of Arik’s highly trained manpower have lost their jobs.” 

While it is obvious that Arik Air is indebted to local and international creditors which led to the takeover in the first place, but observers say AMCON’s intervention has further worsened the situation and left the airline in a more precarious situation. 

Some believe the way out is for both parties to drop the legal toga, stop allegations and counter-allegations and engage in frank talk for the survival of the airline. 

“At least there must be an end to the six-year debacle that has not led us anywhere,” one of them, who pleaded anonymity said.

A former president of the Aviation Roundtable and Safety Initiative, Dr Gbenga Olowo, said the takeover of Arik and Aero Contractors, another airline, was “suicidal”.

“From day one, I have always been against the AMCON takeover. I said if you are a receiver manager, you are there to kill the business, but a turnaround manager is to set the debt aside for a period of time and return the business back to life.

“What AMCON was doing was to pay the banks’ indebtedness and still run the airlines (Arik and Aero). It is not possible, especially the damage of collapsing off-balance sheet loans to on-balance sheet.

“Something that was already at four per cent and went to between 14 to 16 per cent, is automatic bankruptcy and that is why Arumemi-Ikhide has been going in and out of courts.”

Olowo also pointed to the need for accountability. “To make a decision on whether AMCON should remain or not is very simple; evaluate the involvement of AMCON in all the businesses it took over. What did they do in Arik and Aero? Are the two airlines still flying? Are the banks they owe smiling now? If all the answers are yes, then, leave AMCON, but if it is the reverse, AMCON should go,” he added.

An aviation management consultant, Babatunde Adeniji, said AMCON must render an account of its six-year stewardship in Arik Air. 

He said, “After six years, the court has said, “Give returns of the time you spent there. When you got there, how much did you recover? What’s the status of the business? Go and file returns. You couldn’t file returns, what you post on the website is a qualified account, which means your own auditors refused to sign it.

“Can you imagine? Your own auditors said we can’t sign this account, you are now telling the owner to come back and you are giving condition, condition for what.

“You were supposed to tell him, ‘We took over the business for six years, because you are owing the company, this is the amount we have collected from the business, this is the amount that is left for you to pay’. That is what you should do, showing evidence.

“You have not given any account, you have not done anything. Meanwhile, you diverted the man’s asset to go and start another airline. Because you want to recover debt, you now turned yourself into an owner, you are not an owner…”

Group Capt. John Ojikutu, rtd, insisted that it was “a wrong decision to get AMCON involved in the management of the commercial operations of the distressed airlines where it has no experience.”

“My advice in 2014 was for the government to look for foreign and local technical partners and investors to buy the local and foreign assets and liabilities of Arik Air and Aero. Encourage the successive airlines after the sales to get designated as flag carriers for regional, continental and intercontinental BASA routes.”

From the perspective of the union, all parties would lose if Arik Air folds up and said it is high time all parties set aside legal battles and found a middle-course approach to ending the Arik Air debacle.

The General Secretary of the National Union of Air Transport Employees (NUATE), Comrade Ocheme Aba, said the solution was for Arik Air stakeholders to explore some form of settlement with AMCON “so that the place would not be liquidated because there is a limit to which AMCON can continue to run the place.

“They (AMCON) don’t have the capacity to run any business: they don’t have personnel trained to run the business, they have personnel trained to recover debt. That is what they are. No person can blame them for not running the company well, that is not part of their training.”

 

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