Sunday, September 24, 2023 6:37 pm
In this interview, Ahmed Kuru, the Managing Director of Asset Management Corporation of Nigeria (AMCON), speaks on the fate of embattled airlines, among several others, ahead of AMCON’s 2025 sunset deadline.
AMCON’s takeover of local airlines was to save them from collapse and to recover debt. With the dire situation of an airline like Arik Air, it seems there is no way out of debt recovery.
There’s always a way out of every resolution situation; it’s just a question of give and take. What is important is for us to sit down with the owner of Arik Air, if he (Sir Johnson Arumemi-Ikhide) is ready, and then agree on what makes sense to him and us, to the government, and then we’ll go back to the Central Bank and the Ministry of Finance and share the resolution with him. We’ve resolved issues that are more complicated than Arik, but for any resolution, the two parties must have an understanding that they want to have a resolution.
I think it is going to be very unreasonable for me to say that Chief Johnson should pay me N300 billion which is outstanding because there is no N300 billion anywhere. Sometimes in our resolution initiative, we focus more on the business than even the recovery. Sometimes we let go when we realise that the business will survive because the flip benefit is that you keep improving because more than 1,000 people are working in Arik, and he’s providing services in an industry that has a lot of gaps. So sometimes, when you look at the feasibility of keeping the business going, it also makes you give more concessions. But the party on the other side must also come with the mindset that they are also ready for the resolution.
NG Eagle was set up from the assets of Arik Air. But the exit strategy failed. Is that part of the resolution plan?
Let me talk about NG Eagle. If you recall, when we entered Arik Air, the intention was to stabilise the business. Usually when AMCON enters into any business, normally it’s for debt recovery. When we took over Arik, the intention was not for recovery but to stabilise, because, at that time, the government insisted that the airline must continue to fly. So, by the time we entered, we realised that there must be an exit. Besides the potential obligation that is hanging around Arik, which is more than N250 to N300 billion, there are also trade creditors that have not been paid. Arik, as an airline, has quite a lot of challenges, both local and international.
What we decided to do at that time was to see, okay, some of those assets that are in Arik, actually do not belong to Arik. So, we said, why don’t we set up an independent airline and then move those assets into a new airline and then that new airline now could be disposed of without any encumbrance because there are quite a lot of guys that are interested in entering into the aviation space. And then we started the process of setting up the NG Eagle. It took us almost two years to follow through the process. Even at that time, the aviation ministry was asked to see how they could help the process, but we had to go through the rigors of getting the license.
At the last stage when we were just picking up the license, the aviation industry came up and said that we were planning to set up a national career. So somehow, for reasons not known to us, we were frustrated. They reported to the National Assembly. People started talking about past-due obligations that were part of the original agreement to freeze. So, we were frustrated. And if you recall, three aircraft were branded, sitting on the tarmac for almost two years, which was very strange to us in AMCON. We didn’t wake up overnight to do that. They were with us all through the processes, up to the point that we picked our licensing. We heard through the grapevine that people thought we were going to do a national career. AMCON has no business with any national career; but is only interested in resolving debt issues.
Unfortunately, we were not encouraged, and then we were not able to deal with it, up to the extent that we had to find a way of dealing with the license that was going to expire. So, we started a process, and then we were able to sell the license to somebody who intends to continue flying.
For Arik, we are always ready to have a conversation, because there is no other way than to talk. Many people have come to us, and we have encouraged them to encourage the other party to come and talk to us. But if they don’t, at the end of the day, we have to come up with a strategy on how to move forward because the current situation is not sustainable. You can’t carry good money and put it there because the money is not available anyway. So, obviously within the laws of AMCON, there are provisions to deal with this kind of situation. But our prayer is that we have a resolution with the owners of the business in such a way that it’s a win-win situation for everybody.
There is the claim by the other party that AMCON inherited 30 aircraft in the fleet of Arik, which has been decimated to about three. How many aircraft are in operation right now?
When we took over Arik, there were about 20 aircraft on the ground. They call it Aircraft on Ground (AOG). It doesn’t mean that the aircraft is flying, but it’s on the ground, which means that if you fix one or two things, it could fly. That was the aircraft that was on the ground at the time we took over. However, at that time, based on the report we got, Arik was supposed to have more than 30 aircraft. But some of them have been vandalised, while some have cannibalised. Because what they were doing was to take one engine from here and fix it there, take the gearbox from here and fix it there. So, if you pass the Arik hangar now, you will see many aircraft there. They look so innocent as if you can start the engine and fly them out. But some of them have no engine, some have no landing gears because they’ve been cannibalised to fix some other aircraft. Even for the lenders, it became a challenge, because most of them belong to different lenders: Afriexim, Access, Zenith Bank, a bank from Canada and so on.
Frankly speaking, the guy who set up Arik had a good idea. You have to give it to him because he wanted to have an international airline of certain standards. But he got it wrong buying some aircraft that run into hundreds of million dollars. The aircraft are there, but it will shock you to know how much was paid for them. It’s a serious challenge and usually, we’ve seen it in Arik where someone decides to steal from himself. It’s a problem.
Let me make something clear. AMCON doesn’t get involved in businesses. We don’t. It’s just unfortunate that we got caught up in this Arik saga and we didn’t go there by accident. The government of that day wanted a situation whereby Arik should be saved. Because based on the security report they had, Arik would not have lasted another one or two weeks. And Arik was very fundamental to them.
We had a meeting in the office of the former vice president, who was the acting president. And then the idea that Arik must be saved, you know, because of the prominence at that time. Otherwise, AMCON, at that time made it very clear that we don’t want anything to do with aviation. The minister of aviation was there. Captain Roy was headhunted from the industry and everybody that is in the aviation industry knows who Captain Roy is. Then, there was Captain Ado Sanusi. Even if you are running a private business, it can’t be better than that. These are some of the best guys in the industry. It’s not like AMCON went there and started riding the aircraft from the Tarmac. But the fact that the AMCON name is there, and it is having challenges, so AMCON has killed it? Isn’t it?
And the story of Aero Contractor is the worst, as to what was there before AMCON entered at that time. Because when people decide to steal from themselves, those are the kind of situations that emerge. Some, even in these very special cases, we made sure that AMCON is not involved in their day-to-day activities at all and even in Arik. There is what we call a technical committee, and it was chaired by Dr Demuren. He is number one in the aviation industry today. He is the chairman of that three-man committee that has the MD and the operations guys in charge.
So, if you ask me about Arik, you’d be shocked that I don’t know anything about Arik. It has nothing to do with AMCON. The only time they come to us is if they are looking for money. Because we told them, go and run it professionally, please don’t come to us. And I wish one day some of you could engage Dr Demuren directly or engage Captain Roy directly on the issues. But they keep talking about AMCON, because once you say AMCON, you know, our name sounds like queen. It’s so sweet and offensive. So, it’s unfortunate. We are a bad bank. And once you are a bad bank, you will have a lot of people challenging you.
We hardly close down a running business, I can tell you. Hardly. Some of those businesses were already dead. AMCON cannot just go and see a thriving business and just lock it. It doesn’t happen like that. But something that is just hanging there by whiskers. Just touch it and it drops. Then they will say AMCON has come and they have closed our shop.
Meanwhile, they will not tell you the story behind it. Otherwise, once a business is running and it is running very well and there are quite a lot of them around, we never go near them. Because, you know, once you touch them, it’s trouble. And they are waiting for you to touch them like a child that is waiting to cry because the child was crying.
Any plan to increase the fleet of Arik or Aero Contractors?
*Continue reading from the source: The Guardian