AMCON and the Arik takeover

It is always the joy of every government to see local businesses blossom. Policies are therefore enacted to encourage and indeed help budding entrepreneurs and already established businesses to prosper and create prosperity for the entire country.  Regardless of this, some – in fact – many businesses fail and it is the duty of government and the regulatory agencies to ensure that such failures are anticipated and in cases where failures could result in collateral damage, steps are taken to prevent such collapse.

Agreed, Nigeria is ranked very low on the ease of doing business and in reality, businesses are struggling to survive in this tough Nigerian environment, many businesses do not help themselves by operating an opaque corporate governance system that sooner or later leads to the death of otherwise promising businesses. Any wonder the Nigerian environment is littered with so many failed businesses that started with great promise?

This is the story of Arik Air, which was last week taken over by the federal government via the Asset Management Corporation of Nigeria (AMCON). The company is said to have aN300 billion debt overhang on its neck, N150 billion of which is owed to AMCON alone. The other debts are owed to aviation fuel suppliers, insurance firms, aircraft maintenance organizations, the federal government and various aviation agencies, as well as food vendors.

But that is not all.  Arik is said to be owing staff several months salaries leading to strikes by its staff and the shutting down of its offices throughout the country by a couple of unions last year December. Other failings of the company include poor corporate governance, demotivated pilots and staff, terrible customer services, poor safety measures, which is totally unacceptable in aviation business anywhere in the world.

This is rather sad. Arik Air came at a time Nigerians were yearning for a Nigerian airline that could fill the gap left by the defunct Nigerian Airways and started with great promise and lofty dreams. By the end of 2012, Arik Air had successfully flown over 10 million passengers in less than six years of operation across a network of 41 domestic and international routes. It was operating an average of 120 flights daily from its two hubs at Murtala Mohammed International Airport, Lagos and Nnamdi Azikiwe International Airport, Abuja, Nigeria. At the peak of its growth, Arik was the darling of many Nigerians. It commanded 55% of the airline load in the country.

However, it is said that success breeds complacency and complacency often leads to failure.  Soon, the airline’s management took the wrong turn, somehow. And the centre could not hold any longer. Delays in flight departure and outright cancellation soon became the hallmark of the airline. One after the other, all the core values of the airline were gradually compromised; safety and reliability; honesty and integrity; and respect for the dignity of customers became hollowed and mere rhetoric.

These, according to AMCON, were the reasons that necessitated placing the company on receivership.  It is the reasoning of AMCON that it will be foolhardy or very costly to allow Nigeria’s biggest national carrier to fail with a whopping N300 billion debt overhang.

Like other similar interventions by AMCON, especially in the banking sector, we hope this one too will not only instill sanity and revamp the company but will also help reposition the country’s aviation industry and prevent a major catastrophe. Before now, AMCON has intervened to save Aero Contractors, another airline on the verge of collapse. 

The jury is still out on the benefits of AMCON’s intervention. But if precedence is any guide, then the airlines will be repositioned and consequently sold to credible investors and experts who have the capacity to effectively manage it and turn it into the pride of the nation.