By Onyema Omenuwa
Once upon a time, there was a popular and, to a large extent, reliable Nigerian airline, known as Arik Air. In the absence of a national carrier, Arik’s towering presence on the aviation landscape tended to situate it as such a carrier. Indeed, in name and operations, Arik Air stood out amongst other airlines, as it inclined towards efficiency and, maybe, elitism.
I don’t think one was alone in this perception or assessment of the airline. One could therefore argue that it was the judgment of generality of Nigerian air travellers, and this was clearly shown by the tendency by many passengers to only fly another airline if Arik wasn’t available. But gone are those days.
Arik is still very much around, anyway. And they’re still in operation too, though tottering, and under the management of the Assets Management Corporation of Nigeria (AMCON), an agency of the Federal Government of Nigeria; not the airline’s private owners. Clearly, the Arik of today is no longer the Arik of pre-2014, which, as already noted, bestrode the domestic aviation industry, to the envy of other airlines.
Created in 2004 by engineer businessman, Joseph Arumemi-Ikhide, Arik Air Limited was conceived to fill the vacuum left by Nigeria Airways, the national carrier, which had fallen victim of yet another government involvement in an otherwise viable enterprise. Nigeria Airways got liquidated in 2002, having been in existence for 45 years, beginning when it was formed in 1958, as West African Airways Corporation Nigeria, and got rebranded in 1971 as Nigeria Airways.
The demise of Nigeria Airways was much to the relief of Nigerian taxpayers because it had become one bottomless pit that kept gulping public funds with zero returns to the national treasury. So, like the mythical phoenix, Arik sprang from the ashes of the national carrier, with the concomitant vigour and optimism that normally attend such rebirth.
It bears repeating that Arik initially filled the vacuum left by the Nigeria Airways, and it did so admirably, with governmental support fully at his disposal. At a point during those initial years of its operations, Arik had no less than 30 aircraft in its fleet, having ventured into international operations too. Because of its strategic place in the industry, a good number of Nigerians, not just aviation watchers or players in the sector, took an uncommon interest in the affairs of Arik, hence information on and about the airline was always in public domain. And like I already mentioned, such keen interest wasn’t unconnected with the circumstances under which the airline emerged as a company. Discussing its affairs therefore seemed to evoke some kind of memory that flowed from nostalgic thoughts about Nigeria Airways. And that’s understandable too. Before it succumbed to mismanagement, and finally died, the Nigeria Airways used to be the pride of the government and people of Nigeria, as it literally stood out amongst other national carriers in the African continent.
Sadly, it took no time for that malaise, which afflicts all businesses when prudent management of finances takes flight to also find a home in Arik Air. Ironically, the chief culprit for this affliction in the airline’s fortunes happened to be the Arik Chief (no pun intended), Joseph Arumemi-Ikhide himself who should be the chief protector of its fortunes. On a deeper reflection though, one is inclined to conclude that there was nothing ironical at all in the Arik Chief’s predilection. I mean, one has been around long enough to know the ways of many Nigerian businessmen. Such ways account for the legion of failed businesses that feature poignantly in the country’s economic history.
It took less than a decade in the life of Arik Air Limited for signs of its decline to start manifesting. So, as a business, it would be far-fetched to believe that the airline had inched anywhere towards sound footing before decline set in. Significantly, when the telltale signs were observed, observers were quick to conclude that no lesson had been learnt by Joseph Arumemi-Ikhide from others’ experiences in running an airline. And reasons abound for arriving at such a conclusion.
If nothing else, those who know the Arik Chief know that he has never been given to coded lifestyle. And that lifestyle is one of ostentation. Another reason that has been adduced by those in the know for Arik Air’s misfortune is that the Chief’s ostentatious lifestyle fed profusely from the business. So, the trouble that Arik Air landed in was unavertable because Joseph Arumemi-Ikhide had set the stage for it.
Presently Arik Air is under receivership. The company’s troubles got to a head in 2015, thereby compelling receivership by AMCON. What this means in simple terms is that the management of Arik Air Limited has been legally seized from the shareholders of the company, of course with Joseph Arumemi-Ikhide as the majority shareholder. For those who are wondering what concerns AMCON in Arik Air, a private company, some explanations will serve. Part of the responsibilities of AMCON, as spelt out in Section 5 of its enabling law, the AMCON Act, 2010, is to: “(a) acquire eligible bank assets from eligible financial institutions…”
Both on the face of the provisions of the Section and indeed when subjected to legal interpretation, it is crystal clear that the Act has armed AMCON with the revolutionary impetus needed to positively impact the economy by resolving non-performing loans of Nigerian banks, and revitalizing companies where necessary. Let us not forget that AMCON was conceived as a creation for a rescue mission to retrieve the Nigerian economy from the jaws of death, personified by dubious and reckless businessmen and politicians. Its targets are businessmen and politicians whose acts or omissions have contributed in no small measure to wrecking the Nigerian economy. Typically, these categories of persons take loans from banks, either in their personal capacity or with their companies, ostensibly for purposes of investment or business operations, but they turn around and misapply the loans. For good measure, they default in paying back, thereby leaving the creditor banks in a quagmire. Such loans ultimately transform into nonperforming loans, and they run into hundreds of millions, in some cases (Arik’s for instance) billions of naira.
With such quantum of money taken out of banks’ capital bases, normal operations would invariably get affected, by way of inability to satisfy statutory obligations to customers. In simple terms, such creditor-banks naturally became distressed – many actually failed – with the attendant effect on the economy. In many instances, what happened was that loans, which ordinarily should be for investments, which will in turn create jobs and concomitantly grow the economy, got diverted for other purposes that have no bearing on economic growth, like luxurious and ostentatious indulgences. And the borrowers carry on as if such loans are not meant to be paid back.
As already stated, Arik’s troubles became too humongous to be ignored by the Federal Government, hence AMCON’s intervention. It can never be that any viable economy accommodates an ailing aviation industry. Again, for a Nigeria that is desperately in need of foreign investors, the robustness of the aviation sector is a sine qua non, for that is what gives the first and, in most cases, deciding impression of an environment that is conducive to investment in.
Arik’s situation 2015 was the kind of situation that would ordinarily attract AMCON’s intervention. And AMCON did intervene as it had simply done in other similar instances. The Corporation converted all of Arik’s outstanding USD exposure to Naira, gave concession of N15 billion on cumulative outstanding balance of N85 billion and between 2011 and 2019 disbursed additional working capital loans of N21.3 billion. But the Arik Chief is incensed by this altruistic intervention. Every now and then, his vituperations against AMCON feature in the media, and one wonders what he wants. The truth is that for the economy to thrive, businessmen like him must be checked. And AMCON is trying in that regard, if you consider that the average Nigerian big man debtor is a bully. He thinks he can have his cake and eat it.
AMCON’s intervention is conceived by statute to ultimately deliver double benefit whenever it’s deployed. Without the kind of distraction that the Arik Chief constitutes, whether by resorting to multiple litigations or using paid agents in the media to discredit AMCON, AMCON would typically resuscitate the airline and thereby save jobs, even as the aviation sector retains the confidence of industry players.
Yet, AMCON’s intervention does not rule out repossession by shareholders of an entity under receivership. Joseph Arumemi-Ikhide himself knows that AMCON will relinquish its hold on Arik Air, even today, if he does the needful. The needful is to reimburse AMCON for all the debts paid off on behalf of Arik. In addition, the shareholders are expected to provide proof of funds for the airline’s operations going forward. Let us not forget that Arik’s indebtedness, put at a whopping N200billion, and, of course, an impulsive decision-making system imposed on the company under a one-man show occasioned the receivership. On reflection, it goes without saying that the receivership averted a freewheeling slide to liquidation for Arik Air Limited.
Before AMCON’s intervention, it was so bad for the airline that, according to insider sources, sometime in October 2016 no operational activity could happen because the airline couldn’t pay for insurance. That was a huge embarrassment for an airline that was regarded highly. Such a messy situation also posed a national risk, given the scare it generated. As of the time AMCON assumed receivership, Arik’s status presented a very bleak situation, and I will just outline how bad it was, with a few instances.
Operations at the airline literally ground to halt as the airline, it was gathered, did not have adequate cash even for a week’s operations. I have earlier mentioned that the fleet had depleted from 30 aircraft, which the company once prided on, to only eight. And what’s more, the company was heavily indebted to Lufthansa Technic; its longstanding Maintenance Repair Organization and they had withdrawn their services and left Nigeria. SAMCO Aircraft Maintenance Limited (SAMCO), a Dutch company responsible for maintaining the CRJs and the Q400s was being owed over EURO2 million representing nearly six months obligations.
Salaries of both indigenous and expatriate staff and crew remained unpaid for an inordinate length of time, thereby making the work environment very toxic. The Nigerian pilots were also being owed for months. In addition, salaries for other local staff had been outstanding for many months too, even as health insurance for the employees had expired and was not renewed.
The mess was just too encompassing that only the very glaring anomalies are being highlighted here. Indeed, the prevailing situation was such that it would be the height of indiscretion to expect dedication to duty from any staff of the airline at all. One can only imagine how a disaffected employee can impact on a company, much less an airline whose every aspect of operations requires absolute dedication. Even recency training, which ordinarily is a routine for pilots to enable them to be certified for flights, was suspended due to lack of funds. As a matter of fact, all simulator training schools abroad were reportedly owed by Arik and had refused further credits. Thus, pilots were grounded, and many flights could not be properly crewed.
One can go and on; of course, Arik became notorious for cancelling flights. The oft-repeated cliché, “operational reasons” became a refrain for them. But what the flying public didn’t know was that that was a euphemism for inability to get Arik aircraft to be fueled on credit, as there were outstanding payments owed to aviation fuel suppliers. Internet subscription too, offered by Globacom, was suspended due to overdue payments. Leases on two A330 planes from subsidiaries of Standard Charter were outstanding for over six months.
The insurance status was no less worrying. Available records showed that the insurance policy for the airline fleet was due to lapse in February 2017, whereas the company was already indebted to the tune of N418,893,067.97 as arrears of unpaid premium. Mercator, the company responsible for the management of the Passenger Service System and sale of tickets was equally owed $2,465,344.63. They subsequently cut Arik off from using the platform.
These are verifiable facts, and they presented a troubling situation. Only an irresponsible government agency would be aware of such and not intervene. Joseph Arumemi-Ikhide’s bullying of AMCON should stop. AMCON is only fulfilling its statutory mandate to recover its debt and where of strategic value to resuscitate an entity, as empowered by law. Arik’s case is not different.
…Onyema Omenuwa is a lawyer and commentator on national issues.