- Others rehash call for Arik, Aero merger for national airline
After stating categorically in one of its stakeholder’s forum that Aero and Arik merger for a national carrier is not feasible due to debt profile, the Minister of Aviation and Federal Government by extension may need to rethink their strategy with calls by AMCON who virtually runs those airlines asking government to make Arik Arik a national carrier. This has generated some reactions ANTHONY OMOH in this write-up examines these thoughts.
FOLLOWING the country’s suspension of its establishment a national carrier after Minister of Aviation, Senator Hadi Sirika promised a December 2018 deadline, a new call for the establishment of a national carrier has been put out; this time by the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr Ahmed Lawan Kuru.
Kuru made this known three days ago (October 28, 2019) when he asked the Federal Government as a matter of urgency to designate Arik as the country’s national carrier.
The AMCON boss had on Monday appeared before the Senate Committee on Banking, Insurance and other Financial Institutions led by Senator Uba Sani requesting the 9th National Assembly to reform the aviation sector.
According to him, such reform in the sector will enable airlines such as Arik, which AMCON took over in February 2017 remain in business for years to come.
This call is generating ripples in the industry as players feel it is the right call for divergent reasons. While some feel it would save the country the challenge of going through the rigors of re-establishing a national carrier others feel Federal Government through AMCON, owing both Aero and Arik while trying to bring a Nigeria Air on board is an abnormally.
Some others however feel that with the huge indebtedness of the AMCON controlled carriers, government should just stick to the process of establishing the new carrier which so far has thrown up certain controversies that the Minister himself had to come out to set straight at one of the organized stakeholders’ forum in 2018.
They are also of the opinion that Arik Air does not require paying the debts, since it’s in technical bankruptcy as most of the debts can be written off properly, they however feel there are many issues and question what Arik have that the Nigeria Air cannot get on its own and avoid the unnecessary challenges conversion will bring?
Head of Research and Strategy, Zenith Travels, Olumide Ohunayo who gave his thoughts on the matter made it clear that establishing another national carrier while government has stake through AMCON in two carriers already was not economically wise, arguing that although government has put down some sum for the national airline project, that amount would not do the job.
“I think from the very first day the idea of a national carrier was mooted, I wrote an article and that article the first session for me was for government to look at the merger of Arik and Aero and if you notice what we always fall back on, including AMCON was that it was an impossibility and the debt of Arik was too high for anybody to go near. Then you begin to wonder, if Arik’s debt was too big and make it a leaking pot then why waste resources in turning it around, why didn’t they liquidate it immediately?
“If you were at the Minister’s interaction with stakeholders, I voiced that opinion and at the minister’s last stakeholder’s forum he said he was surprised that stakeholders were saying such a thing. Suddenly, the government has realized that is about the only option or the best option open to them as it were. We cannot have two airlines owned by the government and struggling to survive and you start a third one to compete with it. It’s not done, either you; liquidate then out rightly and start a national carrier or take the two of them and use that to build a national carrier based on the funds you have invested. Government has funds that was invested through AMCON so you already have a stake.
He concluded, “To me, as I said on the Flightdeck Forum, the option remains Arik, Arik, Arik or look for a domestic carrier or any other carrier within to partner to start it. When you partner with another airline to start it then you are having three government carriers in place. I feel it’s a good thing, I am happy AMCON has changed their tone we are yet to hear from the Federal Government although we only saw that money was budgeted but we are not sure what route they would take. And if you look at the amount budgeted, that amount cannot do anything to start a national carrier from the scratch. As at today we have not seen a clear cut investor that is ready to partner with FG, I think the best way to go is to look at the Arik, Aero option and move with it.”
However, Chairman Nelike Capital, Mr. Alex Nwuba advised to eschew short cuts in everything stating that a national carrier born from a clean slate is best instead of cleaning up the previous.
He told Nigerianflightdeck,” Simple, we should stop looking for shortcuts to everything, a clean sheet national carrier is best as it avoids litigation, shenanigans and potential liability. While it possible to clean up both companies, with our way of doing things, let us take our modus into consideration.
“Starting over means a new certificate and the opportunity for staff at both companies to join… as well as serious consideration of how to build the industry not just the airline…” He said.
Managing Director of Centurion Security and Scribe of the Aviation Round Table (ART), Group Captain John Ojikutu (Rtd) gave his own thoughts stating:
“The creation of a national airline with AMCON –owned Arik and Aero, that was my first suggestion when AMCON took over the two. I was against AMCON managing them because it lacks knowledge in commercial aviation management. AMCON came in to demand for N10bn to startup the management of the airline thereby wanting to increase the airline debt more than it met it.
“Secondly, from available evidence, it contributed to some of the debts that brought Arik in particular to the level of indebtedness it was and still is. I reasoned that it would be impossible for AMCON to recover the over N300bn debts owed by Arik in 30 years even if it makes net profit of N10bn annually.
My suggestions: 1. Assess the value of the airlines (Arik and Aero) assets and the actual value of their debts. The difference should be significantly more of assets than debts.
“ Two: Invite foreign technical partner and investors to buy 45 to 50% of the shares of the new airline: federal and states governments 10%: credible Nigerian investors not more than 20% of what is left and the Nigerian public. This distribution allays the fears of government control or private ownership because of the experiences of failed Nigeria Airways, a national carrier that was turned to government carrier and the various failed private airlines with very short lifespan.”
Travel and tourism expert and Managing Director of Akwaaba Travel Quarterly (ATQ), Mr. Ikechi Uko said government with Arik and Aero can achieve whatever they want to with a national airline because the carriers have great assets.
“I am of the opinion that we can achieve with Arik and Aero what we want with the national carrier. There is a lot of Institutional memory embedded in both organisations and they have great assets that can be converted. They have made errors we can learn from. They also have clients that can be leveraged upon by new investors. I will vote for converting them into a national carrier.
“I don’t see the problems they currently have that cannot be corrected. Beside they are ongoing businesses. It is better to nurture what is alive but sick than to gamble on a new baby that might be born disabled or stillborn,” he said.
Already it would seem the Federal government has proposed to expend N4,694,131,965 as working capital on the botched national carrier project, Nigeria Air contained in the Ministry of Aviation’s 2020 budget proposal to the National Assembly as submitted by President Muhammadu Buhari.