The Asset Management Corporation of Nigeria (AMCON) has signalled its intention to merge Arik Air and Aero Contractors into a single national carrier, a move that could reshape Nigeria’s aviation sector. AMCON’s Managing Director and Chief Executive Officer, Gbenga Alade, revealed the potential merger during an interactive session with media executives in Lagos on Monday, highlighting the severe financial distress both airlines are facing.
Alade outlined the dire situation, stating that Arik Air and Aero Contractors are burdened with debts so substantial that their ability to repay is increasingly unlikely. He explained that AMCON had previously proposed the idea of converting the two airlines into a national carrier to the former Minister of Aviation, but the proposal was rejected. “The former management of AMCON presented the idea of converting Arik and Aero to a national carrier. But the former aviation minister did not buy the idea. We will present it again because that is the best option,” Alade said.
Despite the setback, AMCON remains determined to pursue this course of action, even though the special purpose vehicle (SPV) initially created for this purpose has been sold. Alade hinted at the possibility of creating a new SPV to facilitate the merger, aiming to establish a more viable and sustainable national carrier.
The urgency of AMCON’s proposal is underscored by the broader context of Nigeria’s aviation industry. Former Aviation Minister Hadi Sirika’s controversial launch of Nigeria Air, just days before the end of former President Muhammadu Buhari’s administration, stirred significant debate. The project, which granted Ethiopian Airlines a 49 per cent equity stake, faced scrutiny over the ownership structure, which allocated only 5 per cent equity to the Federal Government, with the remaining 46 per cent held by a consortium of Nigerian investors.
The backlash against the project was swift. In June 2023, the House of Representatives labelled Nigeria Air a fraud and urged the Federal Government to suspend its operations. The current Minister of Aviation, Festus Keyamo, responded by halting the project indefinitely, questioning its legitimacy. “It was never Air Nigeria,” Keyamo stated, “It was Ethiopian Airlines trying to flag our flag.”
In a decisive legal move, a Federal High Court in Lagos recently annulled the sale of Nigeria Air’s shares to Ethiopian Airlines, effectively putting a stop to the Federal Government’s plans to establish the carrier. The ruling came in response to a suit filed by the Registered Trustees of the Airline Operators of Nigeria and five other stakeholders in the aviation industry.
Against this backdrop, AMCON’s plan to merge Arik and Aero Contractors offers a potential solution to the challenges facing Nigeria’s national carrier ambitions. However, the financial woes of both airlines present significant obstacles. Alade candidly admitted that the situation is causing him sleepless nights, particularly in relation to Arik Air, which owes a staggering $52 million to the African Export-Import Bank (Afreximbank). Despite negotiations, the airline has only offered to pay $8.5 million—a sum that falls woefully short of the debt.
The implications of allowing Arik Air’s creditors to seize its assets, particularly its engines, are severe. Alade noted that such a move would spell the end for the airline. To prevent this, AMCON has offered a bank guarantee as a temporary solution, aiming to keep at least three of Arik’s planes operational. The goal is to increase this number to seven by February next year, but the path forward remains fraught with challenges.
Adding to the complexity, the Nigerian Airspace Management Agency (NAMA) recently grounded Arik Air’s aircraft following a court order initiated by billionaire businessman Arthur Eze. Eze, a creditor of Arik Air, filed the lawsuit over an unpaid $2.5 million debt. NAMA’s enforcement of the court order has further strained Arik’s operations, raising questions about the airline’s future.
The financial troubles of Arik Air and Aero Contractors are not new. In 2016, AMCON took over the management of Aero Contractors after dissolving its board and appointing a manager to run the company on an interim basis. The takeover was part of AMCON’s broader mandate to acquire and rehabilitate eligible bank assets. A year later, AMCON also assumed control of Arik Air, which was struggling to service its multi-billion-naira debt obligations to local banks.
Despite AMCON’s efforts, the situation remains precarious. Last year, the corporation urged Arik’s owners to present a credible debt resolution plan if they hoped to regain control of the airline. However, the prospects of such a resolution appear slim. In response to the mounting challenges, AMCON has announced plans to engage international asset tracers to locate and recover assets hidden by recalcitrant debtors, both domestically and offshore.
Alade emphasised that since AMCON’s new management took over five months ago, they have recovered approximately N100 billion from high-profile debtors. This achievement has been supported by strong backing 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 is planning a major stakeholders’ conference before the year’s end, where senior officials from the Central Bank of Nigeria, relevant ministries, banks, and the judiciary will convene to address the issue of non-performing loans in the country. The corporation is also focusing on reviving assets in the oil and gas, power, and telecommunications sectors, aiming to enhance production, generate foreign exchange, and create employment opportunities.
Alade highlighted the importance of resolving Nigeria’s power sector challenges, noting that some banks spend as much as N500 billion annually on diesel to fuel their generators. He believes that addressing these issues could significantly improve the business environment and stimulate economic growth.
In the telecommunications sector, AMCON is working to revive dormant assets and bring them back into operation. Alade expressed optimism that these efforts would yield positive results, contributing to the broader economic recovery.
As AMCON grapples with the complexities of managing Arik Air and Aero Contractors, the prospect of merging the two airlines into a national carrier remains a tantalising possibility. If successful, this move could provide a much-needed boost to Nigeria’s aviation sector and help restore confidence in the country’s ability to operate a viable national airline. However, the road ahead is fraught with challenges, and the outcome remains uncertain.
