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Aero Contractors airline: Going, going…

By Wole Oyebade
22 July 2022   |   2:43 am
Barely a month after operators raised the alarm about the imminent collapse of three local carriers, the prediction perhaps has its first casualty in Aero Contractors airline.

Aero Contractors airline. Photo:Aero

Barely a month after operators raised the alarm about the imminent collapse of three local carriers, the prediction perhaps, has its first casualty in Aero Contractors airline.

The oldest and one of the best-managed indigenous carriers in Nigeria has been gliding through administrative rough patches and sent reeling by the turbulent operating environment. Now, it needs a miracle to avert a crash. WOLE OYEBADE writes.

When the Asset Management Corporation of Nigeria (AMCON) took over Aero Contractors in 2016 “to save it from collapse”, stakeholders had little faith in a distressed airline piloted by debt-recovery bankers and undertakers.

The sceptics’ main reservations were their know-how to micro-manage and upturn fortunes of the airline while weathering storms of an operating environment that had unsettled even new startups.

After an initial struggle with unpaid staffers and creditors, the new management pulled a rabbit out of the hat with a rejuvenated maintenance facility to service Boeing 737 Classics locally. The landmark achievement resonated industry-wide, even as things started looking up for the carrier.

But the booby trap was the difficult operating environment aided by rather curious managerial decisions, which industry watchers have described as administrative blunders.

Last Wednesday when it “temporarily suspended” scheduled operations, the once beautiful bride of local aviation had only a Q800 aircraft in its fleet – which runs afoul of a minimum of two aeroplanes statutorily required to run scheduled commercial operations in Nigeria.

While its management is optimistic about a rebound in the next month, stakeholders said that the troubled airline faces an uphill task and would require more than strategic thinking to stand another chance.

A strategic turnaround cut short
Aero Contractors is the oldest operating airline in the country and only next to Nigeria Airways in the history of Nigerian aviation. In 2016, just after its 57th birthday, it showed major signs of distress that brought it under the care of AMCON – the government’s special purpose vehicle for the recovery of debts.

With the injection of funds by AMCON and Capt. Ado Sanusi-led management, Aero rallied back to prominence in two years, through the revamped Aircraft Maintenance Organisation (AMO) that slowly returned dead aircraft to operations and offered C-check services to other airlines.

While receiving the Nigerian Civil Aviation Authority’s (NCAA) accreditation to conduct advanced maintenance work (C-checks) on Boeing Classics at the facility in 2018, Sanusi affirmed that the airline in less than three years “has risen from the ashes”.

Aero had in a short while successfully conducted three C-checks on 737 Boeing aircraft, relying wholly on indigenous engineers with technical support from Messrs AJWaters/South African Airlines (SAA) Technics partners.

Sanusi said: “The airline has since December 2016 returned to full operations and grown its fixed-wing operational aircraft from one to four. From one helicopter in 2017, we now have five operational helicopters with the capacity to further grow this number to 10 helicopters by the close of the year.

“In all, we began our repositioning journey growing our domestic operations from eight to 32 daily flights, from ferrying 8,000 passengers per month, to 52,000 passengers per month in and out of the several airports in our route,” he said.

Hearing the impressive scorecard brought a huge sigh of relief to the industry and its critics, though for a short while.

Overbearing undertakers, rots
Influences of AMCON, a major partner in the revival, began to spread to Aero Contractors soon after. The Guardian learnt that there was a conflict of interest on what to do with the airline, coupled with the burden of ownership of debts the defunct Oceanic Bank had allegedly incurred on behalf of Aero Contractors.

A party aware of those disputes explained that the debt recovery body had a difficult task handling the aviation sector. “AMCON was originally set up to reclaim debts owed by banks. Later, it spread its tentacles to debtors of those distressed banks. Note that the affected banks rarely collapse, but their indebted associates do once AMCON comes in.

“So, Aero, just like Arik Air, was naturally meant to fold up under AMCON, but for the reason, the Minister of Aviation gave for inviting AMCON to aviation: ‘to save the airline from collapse and avoid job losses. Reluctantly, they had to forge on.

“Secondly, there were some aircraft acquired by Oceanic Bank and clearly overvalued and requiring huge repayment. They were not in the books of Aero. Because of the affinity between the bank and the airline, AMCON insisted that the bad assets come under the struggling airline. Sanusi refused. When compelled, he resigned. And that was the beginning of the end of that recovery era.”

More intrigues…
The airline, under new leadership, last October leased two Airbus 320 from Heston Airline in Lithuania to sustain pandemic operations – a radical departure from the Boeing series in which the airline has developed both local capacity and maintenance competencies.

Managing Director, Capt. Abdullahi Mahmood had described it as a great feat for the airline. “We have acquired the right equipment for the local market and our fleet. They bring our equipment to six. They are efficient, especially as the parts are more readily available and more fuel-efficient.”

Industry watchers were not impressed by those assertions. About six months after, the airline was already battling another hurdle that questions the undercurrent behind the Airbus lease.

The National Union of Air Transport Employees (NUATE) and the Air Transport Senior Staff Services Association of Nigeria (ATSSSAN), in May 2022, raised the alarm that the airline was on its way to “decommissioning” following alleged claims that its operating aircraft (the Boeing series) was “too old to fly”. Though the management was quick to deny the claims, the workers further alleged plans to ground Aero Contractors airline and lay off the remaining 40 per cent of its workforce.

The unions noted ulterior motives by some hidden forces, whom they said engineered the “phoney lease contract” with the House of 5As to further distress the airline. In the said contract that wet-leased the two Airbus aircraft, “Aero was given only three seats” as royalty.

“Whereas the contract was for the purpose of expanding the airline’s network, the leased aircraft somehow supplanted all Aero aircraft on its juicy routes, pushing Aero aircraft to fringe routes with limited passenger intakes.

“For the period that the lease lasted, the entire Aero Contractors was essentially working for House of 5As, as the lessor was making more money than the airline itself. No wonder the airline ran itself into a deep financial crisis and began to owe salaries unprecedentedly,” the unions had stated.

Inevitable shutdown of operation
This week and barely two months after the alarm, the airline said impacts of the challenging operating environment on daily operations had made the temporary suspension of scheduled passenger services inevitable. Indeed, it has been very tough for all operators in the areas of galloping costs of fuel, operations and forex liquidity crisis.

According to an in-house source, “Aero has multiple aircraft that are due for maintenance, but there is no forex to purchase spares to meet up with the schedule. That is why it has to suspend operations for now. I see us coming back very soon; by this month’s end or next month.

“This is not a challenge peculiar to us. Even other airlines that should be carrying out maintenance locally and paying in Naira at our facility are considering the waiting time of 30 to 40 days due to delays in getting forex to buy spare parts. The alternative is to either go to Ethiopia or South Africa. It is very tough for everybody.”

A union leader in the sector, Olayinka Abioye, who was full of commendation for the efforts of Sanusi, added that the resilience of both the Aero workers and their unions had helped the airline to survive thus far, and already too late to allow it to bite the dust.

To get well again…
Abioye said though the carrier had suspended scheduled operations, while other arms are still active, it was high time all hands and efforts were deployed to help “Aero returns bigger and better to allay our fears that this scheme is not to collapse the airline”.

“The Charter operations should be conducted in a more transparent manner and be open to a government audit. The Maintenance, Repair, Overhaul (MRO), which ought to have been a success story, has some issues that also require urgent review and reengineering. If for instance you are supposed to operate a 24/7 MRO and your workshop closes by 1600hrs (4 pm) daily, and you refuse to pay your engineering crews adequately as is the norm, then you are not ready for business.

“Some airlines that ought to patronise Aero refused due to the time frame and until management addresses the remuneration system to its Engineering crews, nothing much can be achieved. The Aero Training School should be given the aggressive and maximum publicity that it deserves so that it can fare well and better than some other Air Transport Oversight System (ATOs) located in Lagos.

“I commend the workers for their stewardship to Aero and the aviation industry at large and their unions who rose to the occasion to rescue them from humiliation. Aero must not die because we know some masquerades hiding behind the scene to dictate and mislead management and the AMCON to kill Aero so that their friends can return to buy off her carcass,” Abioye said.

Secretary General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd) said being the oldest airline in the country with foreign technical partners, “Aero has enough experience not to fall into commercial aviation temptations of today as the new domestic airlines are doing”.

Ojikutu said the airline might have another chance through its maintenance facility and its ATO licence for aviation faculty training, but it must think outside the box.

“I mentioned in 2020 that COVID-19 is not the main reason why our domestic airlines’ earnings were drawing down but poor corporate management, which started years ago before the pandemic. We have been importing fuel years back into the early 2000s and fuel prices have gradually been increasing from N120/litre to N200/litre at a time and quadruple this year to N800/litre. As the fuel price was increasing, so was the dollar against the Naira.

“Don’t they (airlines) have internal development systems analysts? Let Aero use what it has now to make whatever earnings it can make locally and look for smaller aircraft for its operations because very few today can pay the high fares on scheduled commercial flights,” Ojikutu said.