A seasoned aviator and former Managing Directo/Chief Executive of Skyway Aviation Handling Company (SAHCOL), Dr. OluOwolabi has advised that the Chairman of Arik Air, Sir ArumemiIkhide, should be involved in the rescue mission of the ailing airline by the Assets Management Corporation of Nigeria (AMCON).
According to him, incorporating his expertise into the airline’s new management under AMCON, is the only way that can guarantee a quick turn-around of the airline at the shortest possible time.
DrOwolabi gave the counsel while speaking with journalists in Lagos recently on the fate of Arik Air, the country’s biggest indigenous carrier which management was recently taken over by AMCON consequent upon a heavy debt overhang on it.
“AMCON should not exclude the Chairman from the new management if the airline should not go the way of Air Nigeria,” the former SAHCOL boss noted.
He pointed out that while Chief Arumemi may not wield any authority in the new team of the ailing airline, “his expertise especially as the visioner of the airline, is needed at this trying period to assist in salvaging the airline from going moribund.”
In his exact words: “the Arik Air Chairman is a man I respect a lot and I believe he had a mission while setting up the airline, in the first instance, and as such AMCON needs to involve him in the new management structure; though without authority, his presence will help to salvage the ailig airline in the long run.”
DrOwolabi was of the opinion that AMCON came unto the scene rather too late “because a lot had gone wrong in the airline considered to be the biggest aircraft in Nigeria granted flag carrier status to run international routes into United States of America and United Kingdom destinations.”
He however blamed SirArumemi for having a penchant for foreign pilots and engineers, among others, whereas skilled and competent Nigerian experts were available, pointing out that, they (Nigerians) could have handled the airline’s operations effectively and efficiently for profitability.
Aviationline investigation revealed that a number of management problems including over investment in expatriate staff were part of the issues that saw Arik Air into murky waters. An inside source in the airline who pleaded anonymity confirmed that the airline’s management’s penchant for expatriate staff was partly responsible for its heavy debt overhang that warranted the AMCON’S intervention in its management. This category of staff was found in almost every department including the cleaning department where they are always the head. We gathered that they consumed a large chunk of the airline’s earnings. According to the source, the expatriates’ salaries and allowances were denominated in hard currency whereas most of its income was essentially in the local currency. Besides, the foreigners were quartered in highbrow hotels in Banana Island, Ikoyi and Victoria Island areas of Lagos, a development which drained the airline’s vaults.
“You may not believe it, almost every department of Arik Air is headed by expatriates whose salaries and allowances are paid in US Dollars and are accommodated in expensive hotels whereas their Nigerian counterparts who are paid peanuts are owed salaries in arrears,” the source added.
DrOwolabi however took a swipe at the Nigerian Civil Aviation Authority (NCAA), the local regulators of the industry, for condoning a lot of not only Arik Air’s obvious lapses but also those of other airlines to the extent that AMCON is now intervening in their management. According to him, the NCAA was aware that Arik Air was indebted to its staff and a number of creditors including local and offshore companies but kept mute or was afraid to wield its big stick for reasons best known to it.
“NCAA should be asked a few questions regarding the fate of Arik Air and its eventual take-over by AMCON. The airline, apart from AMCON was owing a number of banks, about three or four of them in addition to both local and offshore agencies: air services providers, petroleum marketers, handling companies, etc,” the former SAHCOL boss said, stressing that, “the development could have been triggered NCAA to perform its economic regulatory functions without fear.” He wondered why the NCAA refused to act earlier than now in its capacity as the local regulatory body especially as aviators believe that any airline under such a heavy debt burden could compromise safety”.
DrOwolabi also said that apart from taking the airline out of its debt quagmire, AMCON has to design strategies to take Arik Air back to its international routes especially the United States of America’s skies.
While on the verge of collapse, Arik Air had adopted, what it considered, cost saving measures in order to remain afloat. These include cessation of operations on certain routes including the rather lucrative Lagos/New York route due to a shortfall in the number of aircraft in its fleet. The fleet, we understand, had shrunk from 31 to 20, a development which came about as a number of aircraft were grounded due to paucity of funds to either fix them in overseas maintenance centres or to procure spare parts, both denominated in hard currency.
“Arik Air will find it difficult to re-enter certain routes especially the international ones particularly the US because regulation in our country is a different situation in other countries. America, for instance, places premium on safety in its airspace and of its citizens wherever they are,” the former SAHCOL boss explained.
According to him, service must be perfect; it is very essential. Any airline in the world that has delayed flights especially on international routes will face a lot of difficulties with their customers who would advise their agents not to buy its tickets due to disappointments.
“When you disappoint one person, you have up to a minimum of 50 people to him/her coupled with regulatory issues in the country of destination whenever they decide to re-enter the destination,” DrOwolabi added.
In his opinion, there is a positive correlation between service and profitability and once an airline begins to terminate services on international routes, there are always problems when you want to re-enter such a destination.
Meanwhile, AMCON has begun in earnest the rescue mission of Arik Air which management it took over barely a month ago as it was believed to have owed close to N300 billion. To achieve this AMCONhas embarked on a number of strategies including scaling up the ailing airline’s operations in order to optimize income to offset the debt.
Stakeholder in the aviation industry are however worried that Arik Air’s experience especially AMCON’s involvement in its management had befallen a number of airlines in the country in the recent past but never came out of it. They cited the example of Air Nigeria which had gone moribund and Aero Contractors, the first indigenous airline in the country, which is still struggling from going down. Air Nigeria, they said had formally shut down its operations for over two years now without being able to offset its debt including what it owed staff as salary arrears thus becoming a member of the league defunct airlines, just like Nigeria Airways, that buried its corpse but the legs are still exposed. In the case of Aero Contractors, its offshore operations have sustained it up till now.
Arik Air’s new management has uncovered a fresh indebtedness of about $78 million to the International Air Transport Association (IATA). The debt was consequent upon the failure of the airline’s former management to remit payments for services rendered by IATA. Consequent upon the huge indebtedness has prompted the global body to temporarily suspend the carrier from its Billing Settlement Plans (BSP).
IATA Area Manager, South West Africa, Dr, Samson Fatokun in a statement disclosed that the airline’s suspension from the IATA financial systems does not affect its IATA membership or IOSA registered status, adding that Arik Air remains a member of IATA and a fully IATA Operational Safety Audit (IOSA) registered airline.
AMCON’s consultant, Simon Tumba however assured that the new management was actually working on ensuring the return of five of the airline’s aircraft stating that when those arrive the airline’s management may consider certain lucrative routes to fly in order to prevent the airline from going under..
Tumba however, lamented that the carrier was yet to remit pensions to pension administrator with debts owed to service providers all over the world.
He further alleged that the new management of the airline had no record of operations of the airline since 2015, making it difficult to trace its transactions as the former management was not being cooperative in the matter.
He stated that the new management is focused to reposition the sector, adding that contrary to insinuations that AMCON wants to liquidate the firm, he said, “Nothing is farther from the truth.”
“Arik is very critical to air transport in Nigeria. AMCON wants to manage the airline and return it to profitability. One man used to decide everything. There was no board. Everything rotated from one man.”
He expressed the hope that Arik could still be turned around because it had the capacity to be profitable.