The Asset Management Corporation of Nigeria (AMCON) on Wednesday said Arik Air owes creditors over N361,705,000,000.
Breakdown of the credit includes a debt of N146billion owed Arik, N165billion owed commercial banks, N26billion owed federal aviation agencies and regulators and $81million owed foreign creditors (which translates to N24,705,000,000 at an exchange rate of N305 to USD1).
The debt also excludes five and seven months salaries owed pilots and other staff of the airline respectively as well as vendors and contractors.
Managing Director, AMCON, Ahmed Kuru stated this on Wednesday in Abuja while appearing before the Senate Committee on Banking, Insurance and other Financial Institutions over the takeover of the company.
With an estimated revenue of N7billion monthly and established in 2006, Arik holds approximately 60 percent share of domestic flights in Nigeria. It also serves destinations across West Africa and flies to London, Johannesburg, Dubai and New York.
The total value of all critical assets of the airline is worth N40billion. The airline is owned by a Nigerian Johnson Arumemi-Ikhide.
He submitted that default in repayment of loans posed systemic threats to banks and the Nigerian economy.
This, the AMCON boss explained, is why the airline must continue to fly to pay its debts. He announced that the new management has suspended international flights due to the myriad of challenges facing the airline.
In the same token, he revealed that AMCON has appointed KPMG to carry out financial audit of the company in the last three years.
Recall that AMCON took over management of the airline last week.
But Arik is not the only airline struggling: Nigeria’s second-biggest carrier, Aero Contractors, stopped services for four months last year because of serious financial difficulties.
Kuru also pointed out that out of the 30 aircraft in Arik’s fleet, only 10 are operational.
“In spite of the leniency and good faith demonstrated by AMCON throughout the negotiations, Arik refused or neglected to adhere to the terms of settlement. AMCON continued to bear the burden of repaying the Bank of Industry loan at 1percent interest rate without any corresponding commitment from Arik. So far, AMCON has paid N9.05billion on behalf of Arik,” he said.
According to him, the airline has paid N50million of its debt in the last 12 months, while putting the total recoveries from Arik till date at N4.6billion.
Appearing alongside the Chief Executive Officer of Arik Airline, Roy Ilegbodu, Kuru assured that in the next three weeks, issues of flight cancellation associated with the airline will be over.
He also debunked reports in some sections of the media that the Federal Government intends to convert the airline into a national carrier, stressing that the take over is to stabilise the company in the next six months.
He listed problems associated with the management of the company to include: poor corporate governance, demotivated pilots/engineers, constant industrial unrest with unions and default in payment of insurance premium.
Others are lack of payment to service providers, lack of accountability, constant flight delays, flight cancellation without explanation, luggage pilfering and outright disappearance, abandonment of luggage on international routes, habitual disregard for orders of regulatory agencies, lack of remittance of deducted staff taxes to relevant bodies amongst others.
In their separate reactions, chairman of the committee, Rafiu Ibrahim and a member Kabiru Gaya supported AMCON for the take over.