After N87.6bn bailout, Nigerian airlines’ crisis persists

Eight years after the Federal Government took steps to rescue airlines and save them from bankruptcy by disbursing over N200 billion out of the N300 billion-intervention fund for aviationand power sectors, the carriers are in a pitiable situation. Out of the intervention fund, N87.6 billion actually went to the operators.

There are indications that the Federal Government is investigating how the N87.6 billion intervention fund for players in the aviation industry was actually spent by the beneficiaries. A source who pleaded anonymity said that government was worried that despite the assistance to the carriers, they are showing signs of bankruptcy. Investigation by New Telegraph reveals that the airlines have not applied the intervention fund judiciously, which made the status quo to persist.

Virtually all the airlines received the funds to rescue their operations, but since then, four of them, Chanchangi, Air Nigeria owned by business mogul, Jimoh Ibrahim, Kabo Air and IRS Airlines have ceased operations, leaving a backlog of unpaid debts in their trails.

Air Nigeria, re-christened from Virgin Nigeria, was the highest beneficiary, receiving N35.5 billion, which was supposed to be monitored by the Central Bank of Nigeria (CBN), as well as theBank of Industry (BoI). Other airlines that had benefited included Aero, which received N20 billion, Arik Air got N15 billion, Kabo Air got N6.66 billion, IRS and Chanchangi Airlines got N3.4 billion each. Some of the least beneficiaries included Dana Air, which accessed N618 million, Caverton Helicopters got N1.348 billion, Overland Airways got N805 million and First Nation Airways got N271.7 million.

To ease the pressure of the fund on the airlines, government had agreed on interest rates of between two and seven per cent, while the airlines had the grace to repay the loans between 10 and 15 years. Shortly after accessing the huge cash, most of the airlines suddenly shut down. The situation has also put the Asset Management Corporation of Nigeria (AMCON) in serious dilemma as to how to recover its funds.

Minister of Transportation, Mr. Rotimi Amaechi, recently told the Senate that beneficiaries of the intervention fund mismanaged the funding they got from government. His words: “In fact, there is a particular man who collected N32 billion and left the country. I don’t think that the Federal Government needed to release N52 billion to investors in the maritime industry.

“One of those who collected the aviation bailout, who has done nothing with the money, is walking freely on the streets of Nigeria; his airline is dead and he did not even deem it fit to inform the ministry,” Amaechi said. Experts told New Telegraph that AMCON was concerned, the reason it moved quickly to take over Aero Contractors before it goes the way of Chanchangi, IRS, Air Nigeria and Kabo that have gone into oblivion.

AMCON had, last week Friday, dissolved the Board of Aero Contractors and appointed a receiver manager, Tunde Fagbemi, over the affairs of the airline. The decision, according to AMCOM, was in furtherance of the statutory responsibility of acquiring Eligible Bank Assets and putting them to economic use in a profitable manner.

AMCON is now both the majority shareholder and creditor of Aero. Former Commandant, Murtala Muhammed Airport, Lagos, Group Captain John Ojikutu (rtd) challenged government to ask questions on how the fund, which he said had gone down the drain, was disbursed and put to use by the airlines.

“The policy of Aviation Intervention Funds is one in which political appointees and the technocrats in the ministry induced government institutions, through the Presidency, to provide ‘loose’ funds for the private airline operators at interest rates as low as six per cent annually; some favoured operators got theirs at two per cent interest rate. This was done at a time when the average interest rate on bank loans was about 20 per cent or more,” he said. Ojikutu, who is also the Managing Director of Centurion Aviation Security Services Limited, disclosed that over N230 billion was shared to these airlines.“The aim of the policy on intervention funds, according to government officials, at the National Assembly’s 7th Senate Public Hearing on the Intervention Fund in 2012, was for the private airline operators to use the funds, not to re-fleet their airline, but specifically for the renegotiation of their bank loans and for servicing their debts.

“Pray, what sort of economy provides such amount of monies as loans for debts servicing?” he asked. Commenting on the development, former President, Aviation Round Table (ART), Capt. Dele Ore, said that the problems of the airlines go beyond intervention fund, as most of them do not have a sound business plan.

“They do not have a workable business plan. Give each airline N500 billion, they will still collapse, with the type of plans they have. This is where I blame the Nigeria Civil Aviation Agency (NCAA). If the CBN can determine who appoints a bank’s managing director and board,as a regulator, I see no reason why it cannot, in a more sensitive industry like aviation. More so when they’re not prudent in their spending. Rather than ploughing it back into the business, they spend their proceeds on other matters.

”The carriers themselves claim that their problem is beyond intervention. At a forum held recently, the Managing Director of Arik Air, Chris Ndulue and the Chairman of IRS Airlines, Ishaku Rabiu, maintained that the industry was being crippled by high operating costs.

They cited fuel, navigational charges, import duties on aircraft and spares, Value Added Tax (VAT), among others, as factors militating against the stability of the domestic airline industry in Nigeria. According to them, with all these in the face of short-term loans at high interest rates from Nigerian commercial banks, it was impossible for airlines to operate profitably.

Source: new telegraph