Arik Air owes IATA $78m – AMCON

The Asset Management Corporation of Nigeria (AMCON) on Monday said Arik Air, under its previous management, owed the International Air Transport Association (IATA) $78 million.

Mr Simon Tumba, Media Consultant to Arik Air, gave the figure while speaking with newsmen in Lagos.

The airline was on Feb. 9 taken over by the Federal Government under the auspices of AMCON as a result of its huge debt profile.

AMCON appointed Capt. Roy Ilegbodu, a veteran aviation expert, to manage the airline under the receivership of Mr Oluseye Opasanya (SAN).

Tumba said the debt was for all aviation services provided under the platform of IATA, which recently suspended the airline from its Billing and Settlement Plan (BSP) and Cargo Account Settlement System (CASS).

“Arik Air under the former management was owing everywhere they operated. Apart from the over N300 billion owed to AMCON, the airline also owes about N50 billion to Nigerian banks and another $78 million to IATA.

“The airline was also in credit to their fuel suppliers and was not able to pay staff salaries for months.

“There was no good corporate governance in Arik as most decisions were single-handedly taken by the executive chairman,’’ he said.

According to him, out of the almost 30 aircraft in the airline’s fleet, only about 10 are currently serviceable, which made the new management to reduce its routes and flight operations.

He said that the new management also discovered that Arik had no record of gains and losses of operations carried out in 2015.

Tumba said the management in collaboration with AMCON had appointed KPMG to carry out a forensic audit on the airline, and the result would be out in 10 weeks.

“AMCON is not interested in liquidating Arik Air. We believe that the airline, which has one of the youngest fleet in Africa, can be turned around through good corporate governance and financial discipline.

“The current management is looking at the backlog of salaries owed staff because the staff should be motivated to get the airline running properly.

“The current management is working with government to add five aircraft to the fleet to increase its size and the airline’s routes.

“We have also resolved the issue of fuel supply, which has improved Arik Air’s flight operations since the takeover,” he said.

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  • GentlemanLen

    This publication has ‘opined’ that Arik Air had a market value of $4B (USD). Nonsense – the company was NEVER valued, in the international market, at more than $200M. Today…that market value has dropped to less than $20M – because the debt (which still belongs to Arik – and must be deducted from any market value). Just because AMCON is robbing the ‘public coffers’ of taxpayer money to pay debt service – that does not add to market value – BECAUSE market is the value of all assets PLUS a multiplier of revenues. Arik Air’s total revenues are less than half of all daily expenses – and company assets are all depreciated and mostly obsolete. The airplanes are leased – so they don’t add any value. Now, if all the daily expenses of AMCON are added to the total debt – the company is virtually worthless. Arik Air will soon join the long list of ‘EX’ airlines.

  • GentlemanLen

    AMCON cannot and will not ‘fix’ Arik Air…unless that bureaucracy spends MORE than $500M (USD), replaces MOST of the company employees, returns HALF of the leased fleet of airplanes and operates a much smaller fleet, pares down the city-pairs for service and builds a full service MAINTENANCE facility in Nigeria. They will not do any of that – and Arik Air will fade into history.

  • Israel Believe

    Arik’s indebtedness is alarming. That explains why Ethiopian airlines didn’t want to take up the organization at some point as the media said sometimes ago. AMCON in all of these has not given up on it. Instead, it has ensured it keeps running while also devising various ways of improved service provision to the people. So far, they are doing a wonderful job.

  • nana kintana

    Time would have revealed to the whole world if Arik would have continued operating if AMCON never intervened. Just in the little time it has taken over, fuel supply issue has been resolved, issurance debts that would have stopped the airlines from running has been offset, salaries of staff paid and now they are trying to increase the size of the fleet? What other way do people need to be convinced that AMCON is capable?

    • GentlemanLen

      Nana Kintana: I’m certain your ‘heart’ in the right place…but your ‘head’ is in a fog. All AMCON has done in three weeks is SPEND NIgerian taxpayer money. That’s incredibly EASY to do. Cutting costs and increasing revenue is the hard – almost impossible – thing to do. Arik Air was NOT in the ‘process’ of failing – Arik Air has ALREADY failed – and NO ONE knows how much money was lost – how much is still owed – and how much it will cost…ATTEMPTING to bring Arik Air back to life. Commercial aviation in Nigeria is an unqualified disaster – and has been for more than EIGHTY YEARS. There is no one in Nigeria with the skills, experience, ethics, ‘intestinal fortitude’ nor the money to ‘cure the ailment’. Nigeria MUST ask for help – and none of that help resides inside the continent of Africa.