How Arik Air spent N91b on obsolete planes, by AMCON
Over two years since the Federal Government took over Arik Air, more facts have emerged on how the airline was mismanaged, with the latest alleging the acquisition of two dated planes for N91b.
Managing Director of the Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, disclosed this yesterday, saying such wastage was not peculiar to Arik Air, but was commonplace in the local aviation industry.Kuru, therefore, charged the government and stakeholders to take a holistic review of the nation’s aviation business and its funding, because of the critical role the sector plays in the economy.
AMCON took over the assets of Arik Air in February 2017 and placed it under receivership over alleged mismanagement and debt in excess of N300b by its former owners.Kuru said airlines like Arik continued to abound on the brink of failure because of the “greed and financial recklessness of their owners.”
He also lamented the impact of overbearing charges and taxation by regulatory agencies, unpredictable and unstable forex, non-existent good corporate governance principles, lack of due diligence procedure and other associated risks as well as over invoicing among other challenges.He disclosed that AMCON’s experience with its intervention in aviation showed that there was need for a total overhaul of the modus operandi in the sector.
Kuru said there are serious issues in aircraft financing because stakeholders dabble into aviation business with the wrong capital mix, adding that banks also hold short-term views about the business.“The previous management of Arik bought two A340 planes for $260m (N91b) and it was discovered that the planes are commercially obsolete within four years,” He added.
“So, even with that huge capital outlay, the two planes were not able to operate to generate the money to service the huge debt, not to talk of making profits. This is just one of many cases,” Kuru said. He added that in such a situation, in as much as they blame the investor for not knowing the right planes to buy, the banks also have a share of the blame.
“If they had expertise, they would have guided against the purchase of commercially obsolete planes. The $260m Arik management spent in buying the two aircraft at the time was enough to buy telecommunications operating licence like MTN, Globacom and others, he stated.