How AMCON is a misfit turnaround manager of Arik Air, Aero – Dr Olowo
Seven years since the takeover of Nigeria’s biggest carriers -Arik Air and Aero Contractors – under receivership, the Asset Management Corporation of Nigeria (AMCON) has proven a lack of capacity to manage the airlines profitably.
Reports indicate that the managerial incompetence of AMCON has caused more damage to the airlines, as there has been an unprecedented depletion in their fleets, which has grossly affected their finances.
Reacting to the situation, the President and Chief Executive Officer of Sabre West Africa, Dr Gabriel Olowo, described the judgment that was vetoed in favour of AMCON to take over the assets of Arik Air and Aero Contractors as “misplaced”.
Olowo explained that the idea of using the agency as a turnaround manager and, at the same time, to recover debts owed by the airlines for the banks was not well thought out.
“From day one, it was a misplaced judgment to put AMCON as a turnaround manager of an airline. AMCON was set up to collect debts of banks. If you are to collect debts, how can you turn the business around?
“If you have to collect debts in the US, that is Chapter 11 of Bankruptcy. I don’t know whether we have that in Nigeria, but if you are declared bankrupt, that means debt is set aside. Bankruptcy does not mean you are dead. It means you set the debts aside.
“You are to pump in fresh funds and resuscitate the business. When the business comes back alive after some years, you can now begin to service these debts. That is what they call a turnaround. But to ask AMCON to come and turn around and at the same time to pay the airline debts, that is the consequence that you are seeing,” Olowo said.
According to Olowo, the woeful performance of AMCON as a receivership manager threatens safety of the airlines, a situation that has been ignored by the regulatory agencies because it is a government affair.
“They have not been able to deliver the airline of your dreams, nor have they been able to sufficiently pay the banks’ debts. I flew on one of the airlines under AMCON receivership one day en route to Ghana, but I won’t mention the name of the airline.
“Onboard, I was able to meet a senior official of AMCON and I asked if that was the standard they came here to deliver because I saw wires that can short-circuit and could cause fire breakout inside aircraft. That is a safety measure and somebody is doing oversight on that airline.
“But, because it is a government affair, somebody turned away his eyes. As it is, we cannot afford to compromise safety. There is no straight cut assignment; ‘I must keep the operations going and I must collect debts.’ This is not possible and we are all seeing the consequence.
“They proposed a few years ago to merge Aero and Arik Air as one flag carrier for Nigeria, but government officials started disagreeing with one another. That means we are not cohesive in policy,” he said.
Olowo advised that the proper way to turn around the airlines profitably and recover debts is to, first of all, declare them bankrupt, then float the assets exclusively with a turnaround manager who understands the business and injects more funds to revive the airlines before recovering debts.
“What do you want to do with these two airlines? Set them bankrupt, get all the assets and let it float a strong airline for you and then, you will know you are making some progress. That progress will service the debts. That is the way out.
“Otherwise, if they continue with the way they are doing, they will end up killing the airlines and will have nothing out of them.
“I read that they met about 17 aircraft at Arik Air when they came onboard, but now, they have less than five. Is that progress? Then, go and check the on-time departure of that airline. If an airline is doing 70 per cent delays, is that an airline?
“So, for me, AMCON coming into that sector is absolutely a misplacement of judgment. We didn’t get it right.
“Shut the airline down, collect your money and you know the airline has become a history. But to ask them to run and at the same time collect money, it is an effort in futility,” Olowo said.
