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Thursday 4 May 2017

AMCON injects N1.5 billion into distressed Arik Air to stabilize operations

It has been revealed that since taking over the operation of Arik airline in February 2017, the Asset Management Corporation of Nigeria, AMCON, has put in a total of N1.5 billion to resuscitate the airline.
This was made known by Captain Roy Ilegbodu, the Chief Executive Officer of Arik Air, during an interactive session with journalists. He revealed that in the last two months that his team took over operation of Arik,
following their appointment by AMCON, they have made efforts to regain control.
He commended AMCON for its support and revealed what is being done to keep the airline operational.

"AMCON indeed has been very supportive with funds and that is why we are still here today. I would say that in the first couple of weeks that we took over, AMCON injected approximately N1.5 billion. Basically, that has sustained us comfortably," Ilegbodu told journalists according to report by This Day.

"A lot of people think that in three or four months, you can turn around an airline. But it doesn’t work so in this business. Everything is well guided because you have to make sure all the parts of the business are in order. Everything is done systematically and AMCON has supported us very well. We have been able to source spare parts and as I speak, we have spare parts arriving on daily basis. So, we have managed to stabilize operations and the unpaid staff have been paid salaries and we are up to date on that. A lot of the expatriates also, we have paid them up to date. As of today, we operate a fleet of about eight aircraft, but by mid-May, we would have 14 airplanes in service and we are going to maintain that number for a while.

"We don’t want to grow the operations so rapidly because it has its own setback. Our passenger number has gone up considerably and on Friday alone we lifted over 3,000 passengers. But decision has to be made on how to proceed in the future."

He disclosed that most of the aircraft his team met when they resumed duty were in a poor state. This, he said, showed that the previous management was using spare parts from those airplanes on ground that were not functional to keep the few flying ones operational. He alleged that this further caused the operational planes to deteriorate. He said that his administration is making deliberate attempts to slow things down considering that the industry is one where safety is very critical.

"When we took over in February, we looked at what was on ground at Arik. What we met was quite interesting and disturbing also. For an airline that had about 30 aircraft on its book, they were only about 10 of them that were functional. So, one would say that AMCON’s intervention was very timely. If you look at some of the things that are on ground, you can easily deduce that the company would have folded up in a couple of months.

"Then, they were no spare parts in the stores to support the operations and you could see slow attrition in terms of aircraft fleets. They were huge bills left unpaid when we came on board which we have tried to address. This business is mainly driven by credit and a lot of people offer credit based on trust. So, once you start to bridge that trust, then you lose those credit facilities. Arik had reached that stage where a lot of creditors were refusing to do business on credit. Then, a lot of flights were being delayed and customer confidence dropped significantly. Also, by the time we started looking at the financial records, in addition to what AMCON was being owed, we noticed that they were also exposed to third party creditors. Based on that, KPMG was called in to carry out a thorough audit of its books and that process is ongoing. More revelations keep coming up daily," he said.
Arik air will not be in a hurry to resume international flights for now until it sorts out a lot of its debt issues, Ilegbodu further disclosed. He said that the airline still owes a group called Europe Controls about €1 million, and other international creditors that must be sorted out before it resumes international flights.

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