Lagos, Nigeria – The Asset Management Corporation of Nigeria (AMCON) is exploring the possibility of merging Arik Air and Aero Contractors to form a national carrier. This was disclosed by AMCON’s Managing Director/Chief Executive Officer, Gbenga Alade, during an interactive session with media executives in Lagos on Monday.
Alade revealed that both airlines are heavily indebted, to the point where they may not be able to settle their financial obligations. “Arik and Aero Contractors owe so much that they may not be able to pay,” he stated.
AMCON had previously presented the idea of converting Arik and Aero Contractors into a national carrier to the former Minister of Aviation, but the proposal was rejected. “The former management of AMCON proposed converting Arik and Aero into a national carrier, but the former aviation minister did not support the idea. We will present it again because it remains the best option,” Alade explained.
Despite the rejection, AMCON is considering revisiting the plan by creating a new special purpose vehicle (SPV), as the one initially created by the former management has already been sold.
The challenges faced by Arik and Aero Contractors are not new. Both airlines have been struggling under significant financial burdens for years. Arik, in particular, owes international creditors such as Afreximbank about $52 million. After negotiations, the airline was only able to offer $8.5 million, raising concerns about where this amount would come from, given AMCON’s own financial limitations.
“Arik is in a very difficult position, and it’s giving me sleepless nights,” Alade said, emphasizing the severity of the situation. He noted that taking away the airline’s engines, as proposed by some creditors, would effectively end Arik’s operations. However, AMCON has intervened to prevent this, offering a bank guarantee to keep the airline operational, with plans to increase the number of flying planes from three to seven by February next year.
In recent developments, Arik Air’s operations have been further complicated by a court order stemming from a debt dispute with billionaire businessman Arthur Eze, leading to the grounding of some of its aircraft.
The potential merger of Arik and Aero Contractors into a national carrier comes against the backdrop of the controversial Nigeria Air project, which was launched by former Minister of Aviation, Hadi Sirika, just days before the end of former President Muhammadu Buhari’s administration. The project, which gave Ethiopian Airlines a 49% equity stake, has faced significant criticism, with the current Minister of Aviation, Festus Keyamo, suspending the project indefinitely.
Keyamo has insisted that any national carrier must be wholly Nigerian, not partially owned by foreign entities. His stance was bolstered by a recent Federal High Court ruling in Lagos, which halted the sale of Nigeria Air shares to Ethiopian Airlines, declaring the transaction null and void.
AMCON’s Broader Asset Recovery Efforts
Alade also discussed AMCON’s ongoing efforts to recover nearly N5 trillion in outstanding debts. He announced plans to engage international asset tracers to locate and recover assets hidden offshore by recalcitrant debtors, some of whom have used special purpose vehicles to disguise their holdings.
Since the new management took over five months ago, AMCON has recovered approximately N100 billion from high-profile debtors and revised the sale of several assets. Alade highlighted the strong support AMCON has received from President Bola Tinubu, the Central Bank of Nigeria, the Federal Ministry of Finance, the Attorney General of the Federation, and the National Assembly.
Looking ahead, AMCON plans to organize a major stakeholders’ conference before the end of the year, where senior officials from relevant sectors, including banking and the judiciary, will discuss the challenges posed by non-performing loans.
Alade expressed optimism that resolving issues in key sectors such as oil and gas, power, and telecommunications would significantly boost Nigeria’s economy, generate foreign exchange, and create employment opportunities. He noted that AMCON had already made significant progress in addressing challenges in the power sector, particularly with one of the country’s largest distribution companies and an abandoned power project in Kaduna.
The AMCON CEO emphasized the importance of addressing the power sector’s challenges, noting that banks with approximately 400 branches nationwide spend as much as N500 billion annually on diesel for generators. Addressing these issues, he believes, would significantly improve the overall business environment in Nigeria.