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Tuesday, 30 June 2015

EXCLUSIVE: Joda Committee to Buhari: Merge debt-ridden Arik, Aero, others to form national carrier

President Muhammadu Buhari on Day One at Presidential Villa
President Muhammadu Buhari on Day One at Presidential Villa
The Buhari administration may be considering merging all debtor airlines in the country into a national carrier, capable of serving the West and Central African regions, with Nigeria as the regional aviation hub.
That is part of the recommendations by the Ahmed Joda transition committee, which submitted its report to President Muhammadu Buhari about two weeks ago. Volumes of the report were exclusively obtained by PREMIUM TIMES.
Six of Nigeria’s leading domestic airlines are currently bogged down by huge debts totalling almost N130 billion, forcing them to turn to the Asset Management Corporation of Nigeria (AMCON) for a lifeline.
In 2014, the Federal Ministry of Aviation gave the debt portfolio of five of the airlines with AMCON at over N190 billion. The amount excluded sundry debts to aviation agencies like the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), suppliers and other institutions.
The ministry said it arrived at the huge figure after a comprehensive audit of the operations of all the domestic airlines.
Details of the audit findings, the Ministry said, showed Aero Contractors’ debt stood at over $200 mn (N308 bn), with 60% of its equity already taken over by AMCON, while Arik Air has been in debt to the tune of over $600 mn (N924 bn); IRS Airlines, $55 mn (N84 bn); Chanchangi Airlines, $55 mn (N84 bn), and the now bankrupt Air Nigeria owing about $225.8 mn (N347.7 bn).
In 2012, Arik, Aero, IRS, Bellview, Chanchangi, Afrijet, Albarka, Caverton, Continental, Air Nigeria and Savannah, were at the verge of going under when AMCON waded in with a N132billion lifeline, saving in the process over 7,000 staff from being thrown into the labour market.
Aviation industry experts told PREMIUM TIMES at the weekend that some of the airlines that were still grappling with working capital challenges recently approached AMCON again with a multi-billion request for a bailout to enable them settle accumulated aviation fuel bills to oil marketers.
The Joda committee advised President Buhari to consider a public-private partnership (PPP) arrangement that would involve all airlines currently with AMCON, as part of the Federal Government’s contribution to a national carrier project.
The committee recommended the decision be carried out in six months.
The committee said this will increase government revenue from the sector, reduce capital flight, expand the local aviation industry and create more employment opportunities to the people.
The Infrastructure Concession Regulatory Commission (ICRC), the report said, should work with the Ministries of Aviation, Finance, Industry, Trade and Investment to implement an aviation-focused PPP framework that would create the environment for the development of aviation infrastructure, procurement and upgrade.
The committee, which noted poor utilization as one of the key challenges in the sector, said about 75 percent of passenger traffic were generated from three airports – Lagos, Port Harcourt and Abuja, while over 90 percent of the revenue earned came from Lagos and Abuja.
To ensure a realistic capital base for domestic and international airlines for sustainability in accordance with global best practices, the committee said the Nigerian Civil Aviation Authority (NCAA) should in the next three months consider the upward review of capital requirements for airlines to N2.5 bn (domestic) and N 5billion (International).
Within the target period, the government would undertake the immediate repairs and upgrade of passenger facilities, including air-conditioning systems, luggage conveyor belts, passenger tunnels, to improve customer experience, increase revenue, and improve the safety of travelers, it said

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