The Assets Management Corporation of Nigeria (AMCON) has attributed the sustenance of Arik to the Federal Government through agencies such as the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), and the Nigerian Civil Aviation Authority (NCAA) that has been waving taxes and other sundry charges that have run into several billions of Naira.
Since AMCON, the special debt recovery vehicle of the Federal Government took over Arik Air in February 2017 as part of measures to “save” the airline from “imminent collapse”, these agencies have stepped back from harassing the airline technically owned by the government because of the insolvency of the carrier even before its take-over over debts above N300 billion.
There are strong indications that the airline may be liquidated as the government through AMCON tries to cut its losses in the airline. The eventual liquidation of the carrier could lead to massive job losses and could create a gaping hole in the airline business in Nigeria.
The corporation said it looked for the least disruptive exit as it did not want a situation where there would be job losses as a result of declaring the company bankrupt and eventual liquidation.
The decision not to liquidate the carrier, it noted led to setting up a new vehicle out of Arik to be called NG Eagle; a project he alleged was truncated at stage five of the process of getting its Air Operator Certificate (AOC) by former Minister of Aviation, Hadi Sirika
Meanwhile, fresh facts have emerged in the conflict of interest between the shareholders of Arik Air and the Asset Management Corporation of Nigeria (AMCON), with the latter showing evidence of failed attempts to return the airline to its founder.
The Receiver Manager (RM) for Arik Air, Mr. Kamilu Omokide in a virtual press briefing with journalists yesterday put the carrier’s indebtedness to AMCON alone at N240 billion, stressing that the claim that the airline had 17 aircraft at the time the carrier was taken over as a big lie.
He said on several occasions, the corporation met with Arik founder on the modality for recovering his airline by paying up the debts but got discouraged when ‘documents of partners to assist him were found out to be fake.’
He said, “Arumemi-Ikhide claimed that he had 17 airplanes in 2017. That is not true. We have the inventory of what we took over. There were only eight serviceable aircraft. Arik did not have money to buy brakes and even maintenance of aircraft. Arik had no reserve for aircraft maintenance. Today, Arik has two B737 and two Q-400 aircraft. The last option for exit is liquidation.”
“AMCON cannot recover all its money from Arik unless Arik is given a concession by all the lenders or the owner brings money through external capital. Beyond Arik, AMCON has taken over all the assets of Arik founder and his wife, Mary. We have taken over Rockson Engineering, Ojemai Farms, and all assets belonging to them.”
Omokide disclosed that one of the greatest undoing of Arumemi-Ikhide was the taking of $270 million for the expansion of international routes without taking into consideration its alleged poor financial standing with the borrowers defaulting with the loans becoming nonperforming.
He further alleged that the loan was taken to buy two A340-500 aircraft which he said ‘ruined’ the airline, stressing that the two four-engine airplanes never made a profit. The wide-body A340-500 was one of the most unsuccessful airplanes made by Airbus sales-wise with many airlines around the globe avoiding the airplane because of its high fuel consumption and high cost of maintenance.
“Arik went down because of the two A350-500 aircraft. They were bad acquisitions. They never made a profit all through. The airline also went down because of the luxurious lifestyle of the founder. About $24 million would be needed to bring Arik back. Arik needs capital restructuring.
“We still cannot understand why he went to borrow $3 million from billionaire Arthur Eze. He said he need a cash injection into his company. He went to court to stop Eze from recovering his money. The case is in Supreme Court. In the midst of the instability of Arik, he went to buy two Hawker private jets. The planes are some of the assets we took over. He used his London home and other assets as collateral. He was financially embattled on so many fronts”.
The Receiver Manager disclosed that in the year 2016, “Arik Air earned total revenue of N61.8bn (2015 – N61,7bn) but spent N128.2bn (2015 – N88.3bn) in earning that revenue resulting in a colossal loss of N84.8bn (2015 – N45.4bn). How does a business lose more than its total revenue in a single financial year? That’s no less a rhetorical question if one understands the things that went on in Arik Air”.
“A natural consequence of unmitigated losses in a business is poor liquidity. Liquidity is the availability of cash and/or assets easily convertible to cash with little or no loss of nominal value. The adequacy of the liquid assets of a business depends on the size of its current liabilities (short-term liabilities).
“In 2016 Arik Air had only N4bn (N4.3bn in 2015) in real cash and about N100m (N2.1bn in 2015) in other liquid assets (receivables and prepayments) available to service current liabilities of N296bn (N210bn in 2015). That’s like feeding an elephant from a teacup,” he added.