Monday, 2nd October 2023

NG Eagle airline incurs N22b loss over stalled operation, National Assembly interference

By Wole Oyebade
11 April 2022   |   3:15 am
Failed bid by the Asset Management Corporation of Nigeria (AMCON) to float a new airline, NG Eagle, from assets of Arik Air, has incurred losses of about N22 billion in the last seven months...

Arik Air,

Stakeholders fault waste of commonwealth, demand probe

Failed bid by the Asset Management Corporation of Nigeria (AMCON) to float a new airline, NG Eagle, from assets of Arik Air, has incurred losses of about N22 billion in the last seven months.

AMCON’s controversial exit strategy from the operations of embattled Arik Air ran into a conflict of interest, with the National Assembly ordering the Nigerian Civil Aviation Authority (NCAA) to withhold its Air Operator Certificate (AOC). The consequence is attendant losses on three grounded aircraft, insurance premiums, staff salaries and other operating costs.

Aviation stakeholders that have followed the development rued the estimated loss of $53 million (N22.06 billion) of national resources and called for a probe of both the business decision and lawmakers’ meddling in strict regulatory affairs of local aviation.

The National Assembly had in February 2022 said the new start-up airline would not see light of the day until Arik Air offsets outstanding debt of N10.8 billion.

The lawmakers, at a joint oversight function to Lagos Airport, said AMCON, which owns the two airlines should show better commitment to asset recovery and offset the outstanding debt to aviation agencies and federal coffers.

The Joint House Committees on Aviation had in 2021 ordered NCAA not to release AOC to NG Eagle till grey issues of staff welfare are resolved at Arik Air.

Findings by The Guardian showed that the new airline did submit a bid for AOC and Air Transport Licence on December 5, 2019, and scaled through the hurdles with manuals checked, flight tests conducted and simulations successfully carried out by the NCAA.

However, an unsigned AOC certificate with the number: NGE/AOC/09-21/001, dated September 21, 2021, was issued to the airline and sighted by The Guardian at the weekend. The airline was granted passenger, cargo, scheduled and charter flight operations, and the AOC was to expire on September 20, 2023.

A source in the new airline said the last lap of approval was actually stalled for “political reasons” rather than technical doubts.

“The issue speaks for itself in the NG Eagle matter. That is the AOC that was ready for issuance and awaiting the Director-General’s signature before powers that be stopped it. That is how we ‘support’ ease of doing business in Nigeria! Because of the private interests of a few, we are killing our own investments and running businesses aground. It is a shame that all those that know nothing about aviation are the ones dictating to the NCAA,” he said.

In the last seven months of inactivity, The Guardian learnt that the aborted airline incurred $1.66 million in staff salaries; expended $934,611 on ensuring unused aircraft; $757,954 on engine lease and shipment; $525,386 on procurement; $298,605 on contracted services and $121,829 on information technology.

Other incurred costs are: $113,699 on logistics; $25,588 on rent; $16,583 on repair and renovation of offices; $36,000 on preservation maintenance; $757,620 on contracted engineering personnel; $2.4 million on heavy maintenance and $45.75 million in revenue losses as at March 2022.

The Guardian gathered that one of the three idle aircraft acquired for the aborted operations will be due for another C-Check by May, estimated to cost $2 million.

Aviation stakeholders said the contrived waste of commonwealth should not go unpunished under a serious administration nor should anyone be surprised at the malfeasance where lawmakers freely meddle with aviation affairs.

Former Commandant of the Lagos Airport in the 90s, Group Capt. John Ojikutu (rtd), said the lawmakers were blameworthy of age-long “dangerous” interference that throws a spanner in the works of the air transport business.

“The interference of those in the NASS is getting too dangerous to be ignored, especially the interference in regulators’ oversight functions that are the exclusive functions of the designated authority. The fifth and sixth Legislative Houses got entangled in the N19.5 billion and N200 billion government intervention funds for government agencies and private operators in 2007 and 2012, respectively. Then, there was no economic recession and it explains why we are where we are today.

“Yet, the manner in which the aviation committees of the current Legislative House are getting involved in the economic regulations’ oversight, especially on service charges, then the responsible authority, leaves much to be desired. The committees are taking us back to the era of self-regulation in the 80s and 90s. Who will save us from ourselves?” Ojikutu inquired.

President of the Aviation Safety Round Table Initiative (ASRTI), a think-tank group of the sector, Gbenga Olowo, said it was criminal and self-indicting that the NCAA issued an unsigned, invalid AOC and allowed interference by non-aviators and state actors that are not recognised by the international civil aviation guidelines.

Olowo added that the loss-incurring operators should as well be made to account for the massive loss of our commonwealth.

He said: “Clearly, due diligence on the side of private investors is lacking. National Assembly oversight, from time to time, has helped a lot. And this one should not be an exception but escalated to the hallowed chambers.

“We’ve said it repeatedly that AMCON cannot run airline business. Since the turnaround process of Arik, the airline has grown worse. Its (AMCON’s) priority is debt recovery rather than airline repackaging for the market. Simple solution to Arik by AMCON would have been to set the debt aside (a la U.S. Chapter 11), pump funds to rebrand the airline and put it on the market where the original owner of Arik is given the first right of refusal,” Olowo said.

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”. AMCON had cited gross mismanagement by the owners of Arik and debt in excess of N300 billion.

Inherited in the lot is the sum of N9.6 billion and $2.3 million (totalling N10.85 billion), being five per cent of ticket and cargo sales charges that Arik Air owed to aviation agencies before AMCON took over, and yet unpaid to date.

Five years down the line, it was learnt that Arik airline remains a hard sell, given the level of rot, debt and hard-to-recover liquidity pumped in to keep it on life support.

As an alternative, the Federal Government, through AMCON, decided on a new carrier, NG Eagle, from some viable assets of Arik Air. At least three Boeing 737 aeroplanes that once belonged to Arik have been stripped and rebranded into NG Eagle’s livery.