Nigeria – Airline Takeover

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After a takeover by the government, the largest carrier in the country is trying to recover.

Investors are eying up airlines that the Assets Management Corporation of Nigeria (AMCON) has taken over, particularly Arik Air and Aero Contractors. AMCON took over Arik on February 9th due to Naira (N) 135 billion in debt.

Nigerian news service This Day reported that the federal government intended to sell Arik Air through AMCON. However AMCON has reportedly been changing the figures of the debt, reducing a previous figure of N300bn to N126bn.

An industry source said that the drastic fall in the exchange rate of the naira in 2016 critically affected many companies in Nigeria. Arik Air was largely funded by international finance institutions including, the US-Exim Bank, the Export Development Company of Canada, and Afrexim Bank. Arik owes Afrexim $24m and EDC $48m, with repayment dates set for 2020.

The Federal Government claims it has three programmes to revitalise the aviation industry, including establishing a national carrier; establishing maintenance, repair and overhaul facility; and the concession of the nation’s airports.

However, aviation industry experts have cautioned against the alleged plan to sell Arik Air and Aero Contractors, querying if how this would benefit Nigeria and make the airlines profitable.

However, AMCON has injected N1.5bn into Arik Airlines to safeguard operations, CEO Roy Ilegbodu said the funds were essential to the continued viability of the airline. He said KPMG had been appointed to carry out a proper audit.

Arik Air has also announced the resumption of flights to Maiduguri in Borno state, four years after operations were suspended for security reasons. The first flight commenced on May 9th.

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Meanwhile, the Managing Director of the Nigerian Airspace Management Agency (NAMA) Fola Akinkuotu has commended the Minister of State for Aviation Senator Hadi Sirika for the successful repair of the Abuja Airport runway.

The runway was closed for six weeks due to deterioration and safety risks. Many passengers were diverted by Kaduna airport, facing its own security risks.

There were, however, significant financial losses caused by the closure, especially due to a drop in passenger traffic. In the first three weeks of operations in Kaduna, Nigerian airlines said they lost around N10bn.

Similarly, passengers who passed through Kaduna said that it was a cumbersome experience, with a three-hour bus ride from Kaduna to Abuja city.

(Premium Times 3/5; The Guardian, Lagos 18/4; This Day 23, 28/4, 5, 7/5)

Find out more in the Africa Research Bulletin:

AIRPORTS AND SERVICES: Nigeria
Economic, Financial & Technical Series
Vol. 54, Issue. 2, Pp. 21616A–21617C

AIRPORTS AND SERVICES: Africa
Economic, Financial & Technical Series
Vol.54, Issue. 3, Pp. 21651A–21652B

AIRPORTS AND SERVICES: Africa
Economic, Financial & Technical Series
Vol. 53, Issue. 11, Pp. 21504A–21506A

Subscribe to the Africa Research Bulletin today.

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