Nigeria’s “bad bank” said on Thursday it had taken over the day-to-day running of Arik Air in an attempt to rescue the country’s largest airline, which it placed in receivership last week after it was unable to pay workers or creditors.
Michael Arumemi-Ikhide, the founder of Arik Air, has said the government seized the airline to meet a political goal of creating a “national carrier” and told Reuters he would challenge the move in court.
Arik Air, which controls around 55 percent of the domestic market and is West Africa’s biggest airline by passenger numbers, has been hard hit by Nigeria’s currency crisis as its customers has to pay for fuel in dollars not naira.
Arik owes AMCON, Nigeria’s bad bank, around 147 billion naira and another 165 billion naira to four commercial lenders, AMCON’s chief executive, Ahmed Kuru said in a presentation to lawmakers on Wednesday following the takeover.
Its founder Michael Arumemi-Ikhide owed AMCON 263.7 billion naira from other businesses and Arik Air, the bad bank said. Arumemi-Ikhide was not available for comment on Thursday, while Arik Air declined to comment.
“We have deployed people there (at Arik) to manage it, pending when we can stabilise it and then bring in investors to take (it) over,” Kuru said, adding that AMCON would review the next steps after managing the airline “for about six months”.
Arik had wanted to expand internationally both to bring in more hard currency, as well as to cushion the impact of the economic slowdown at home, and was looking for new investors to help it grow rather than using debt.
However, AMCON said the state of the airline had turned off prospective investors, with only about 10 planes flying out of a fleet of 30 and total assets of less than 40 billion naira.
“Converting the airline to a national carrier is not on the table. Government does not have plans to do that. The interest of government is that we must continue to fly,” Kuru said.
Arik generates around 7 billion naira monthly but would need around 10 billion naira to stabilise it, Kuru said, adding he expected the airline to be able repay the intervention monies within the next three months.
AMCON was thinking of suspending Arik’s international flights to save cost and focus on domestic routes, Kuru said.
(Writing by Chijioke Ohuocha; Editing by Alexander Smith)
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent. Sign up here.