By Henry Umoru, Emman Ovuakporie & Johnbosco Agbakwuru

ABUJA—THE Senate, yesterday, threw its weight behind the take-over of Arik Airline by Asset Management Corporation of Nigeria, AMCON, saying the situation in the company was worse than what it described as Dasukigate.

Speaking, yesterday, in Abuja when the Managing Director of AMCON, Alhaji Ahmed Lawan Kuru, led the management team on an interactive session with the Committee on Banking, Insurance and other Financial Institutions, led by Senator Rafiu Ibrahim, APC, Kwara South, Senator Ibrahim noted that the Senate was in support of the decision of the agency, provided it was in consonance with the law of the land.

According to him, the decision to take over the airline is that of government and the people.

Ibrahim, who likened the mess in the airline to alleged fraud perpetrated  by the immediate past National Security Adviser, NSA, Mr Sambo Dasuki, said:  “Was the take-over not done rather too late? From what you have given us, this is worse than Dasukigate. It appears what is happening in private sector is worse than that of the public sector.”

Airline’ll regain lost glory in 30 days—AMCON

Earlier in his presentation, AMCON Managing Director, Kuru, shocked the senators with the mess his organisation met on ground in Arik Airline that led to the take-over but assured that the airline would regain its lost glory in 30 days.

Kuru, who noted that within the next two to three weeks the new management of the airline would commence operation with at least 16 aircraft, said:  “Within the next two to three weeks, Arik Air should have up to 15 or 16 aircraft flying.   Arik Air cannot compete internationally. They do not have the kind of services other airlines have.

“Based on what we have achieved in just one week, we are hopeful that in the next three weeks, the issue of delayed or cancelled flights will be a thing of the past. We are carrying everybody along.

“At the end of the day, we want to return it to profitability. We need to emphasize one fact, that the only way we can recover our debts is for Arik  to continue to fly. The banks have come to realize that this is important.

“Government has a responsibility to ensure it intervenes whenever there is threat to national interest. Within the next 30 days, we will be going to places we have not been to in the last three years.”

Arik owes AMCON, N147bn; banks, N165bn; foreign debts, $81m

Ahmed Kuru, who told the senators that the troubled airline was owing AMCON N147 billion, said it was also owing Standard Chartered, Zenith Bank, Eco Bank and Access Bank a total sum of N165 billion.

He said the foreign debts of the company stood at $81 million, while also owing  Federal Government-owned aviation agencies and regulators N26 billion.

According to him, Arik also owes European aviation agencies and service providers $11 million, in addition to the $20 million owed Lufthansa Technik.

The AMCON boss also told the senators that the airline was owing over 2,000 staff seven months salary arrears, adding that  negotiations were currently ongoing on how to immediately resolve the arrears.

He said pilots were equally owed five months salaries, and noted that despite having 30 aircraft, only 10 were operational.

He noted that prior to the interim take-over of the airline, Arik Air could not meet its financial obligations.

Speaking further, Kuru noted that the airline frequently relied on collection of ticket fees from passengers before it could buy aviation fuel, but blamed the incessant cancellation and delay of flight on the inability of the airline to buy aviation fuel.

Intervention not to make it national carrier

The AMCON boss dismissed claims that the Federal Government was planning to make the airline a national carrier, stressing that it was too problematic for the government to handle, since the issue of national carrier was not feasible.

He said:  “In line with AMCON’s statutory mandate, the non-performing loans of Arik Air were acquired in 2011 from two distressed banks: Union Bank Plc, N71 billion; Keystone Bank Limited, N14billion (transaction originated by defunct Bank PHB), totalling N85 billion

“The facilities were granted to Arik for purchase of additional aircraft and to refinance existing term loans. The default in repayment posed systemic threat to the banks and, indeed, the Nigerian economy. The principal promoter of Arik Air is Sir Johnson Arumemi-Ikhide.”

“AMCON also acquired 3 other non-performing loans of companies in which the principal promoter is Sir Johnson Arumemi-Ikhide. Rockson Engineering N107billion, Ojemai Farms Limited -N8.6billion. Ojemai Investment Limited N1.9billion. Total exposure of Sir Arumemi-Ikhide to AMCON is N263. 7 billion.

“In September 2011, AMCON restructured Arik’s debt from N85 billion to N70 billion as a 9 year term loan running at 12% per annum. ‘ Other terms of the restructure included the following: AMCON to appoint a resident Monitoring Manager who shall have the authority to call for any of Arik’s records for examination. Arik to provide three-year record of its remittances to FAAN. Arik defaulted on the term of the restructure and failed to make the monthly repayment as agreed.

“In May 2013 AMCON sourced N26billion of the CBN/PAIF through BOI on behalf of Arik. AMCON disbursed N21.38billion of the BOI loan to Arik as working capital.

“Out this amount, N2.4billion was meant for reconfiguration of two aircraft from passenger to cargo carriers. This was never done as the funds were diverted by Arik Management and is now the subject of EFCC investigation.

‘’Both aircraft were abandoned in the UK. In December 2015, due to accrued interest and unpaid principal, a second restructuring was proposed for Arik debt to reduce the debt from N138billion to N90billion.

‘’Proposal awaiting CBN approval. This was proposed based on Arik’s plan to do a private placement and subsequently do an IPO within a period of 6 months. Based on that they were expecting N44billion from Afrexim as a bridge. None of this happened as Arik could not comply to any conditions given to them.

“In spite of the leniency and good faith demonstrated by AMCON throughout the negotiations, Arik refused or neglected to adhere to the terms of settlement. AMCON continued to bear the burden of repaying the B01 loan at 1% interest rate without any corresponding commitment from Arik. So far AMCON has paid N9.05billion on behalf of Arik.

‘’Refusal to cooperate with the AMCON resident Monitoring Manager. Refusal to disclose financial information to AMCON. Total recoveries from Arik till date N4.6billion (only 3.2% of current exposure). Total repayment by Arik in last 12months- N50million only.

“As at December 2016, Arik’s debt in AMCON stood at N146billion due to mounting interests and unpaid principal. The consolidated exposure of debtor companies in which Sir John Arumemi-Ikhide is the principal promoter in AMCON stands at N263.7billion. This figure excludes Arik’s indebtedness to other banks, aviation authorities (local and foreign), vendors, contractors and workers.

“As at December 2016, Arik’s debt in AMCON stood at N146billion due to mounting interests and unpaid principal. The consolidated exposure of debtor companies in which Sir John Arumemi-Ikhide is the principal promoter in AMCON stands at N263.7billion. This figure excludes Arik’s indebtedness to other banks, aviation authorities (local and foreign), vendors, contractors and workers.

“Arik has about 30 aircraft, the largest fleet in Nigeria. Holds approximately 55-60% of the air transport market in Nigeria. Serves 18 domestic and 11 international destinations, including Johannesburg, London, Dubai, and New York City. Estimated revenue at N7billion monthly.

“Despite all the things we have done to ensure that Arik Air stays in business. But they have not done their part in meeting their own obligations. Arik Air is owing up to seven months salaries to workers.

“They have refused to pay salaries and also refused to ensure that their loans are repaid. We could not just sit back and allow an important airline with about 30 aircraft and covers 55 per cent of all routes in Nigeria to go down. From the records, Arik makes over N7 billion annually.

“We are talking to people to see how they can acquire the airline. They came. But when they saw the records of what was on ground, they decided to suspend everything, pending when we will resolve some of the issues bedeviling it.

“We have deployed people there to manage it, pending when we can stabilize it and then bring in investors to take over. We discovered that out of the 30 aircrafts of the airline, only about 10 were functional. Some of them were not in Nigeria. They have refused to meet all their obligations, even the insurance payment. They did not even have money to buy aviation fuel.

“What they did was that, they collected money from passengers and then quickly use the monies realized to buy fuel. This is how they have been running the place and these were some of the things we met on ground.

‘’The first thing we did when we moved in was to address the payment of salaries of staff. Remember some of them were owed for up to seven months. The staff of the airline are very pleased with what we have done.

“We are hopeful that with an annual profit of about N7 billion and if the monies are not laundered, I think we can pay back the loans in time. AMCON debt is about N147 billion. There are local banks which Arik Air is owing about N165 billion.

‘’These banks collect all the monies they make. The issue of converting the airline to a national carrier is not on the table. Arik is too complicated to make a national carrier. The total asset worth of the airline right now is less than N40 billion.

“Government does not have plans to do that. The interest of government is that, we must continue to fly and people must work. They have about over 2,000 staff. They do not need more than N10 billion to stabilize their operations.

‘’Within the next three months, they will be able to pay back what we have put in right now. In national interest, Arik Air should be allowed to fly.”

Kur,u who spoke on the suspension of international flights, said the airline spent N1.6 billion on aviation fuel to 12 international destinations and that the airline currently lacks the capacity to carry out that function.

“We are thinking of suspending international flights. Arik Air needs about N1.6 billion to buy fuel for international routes. We cannot do that right now.

‘’By the time we manage it for about six months and the airline can now survive, then we can sit down and talk about where to go from there,’’ he said.