Reason why FG may merge Arik and Aero Contractors

The federal government is weighing the possibility of converting Arik Air and Aero Contractors into national carriers as a solution to their significant financial troubles. This development follows discussions led by the Asset Management Corporation of Nigeria (AMCON), with its Managing Director, Gbenga Alade, revealing that both airlines have amassed considerable debts that they may never be able to repay.

Alade shared this information during a recent interactive session with media executives in Lagos. He explained that the idea of converting Arik and Aero Contractors to national carriers had been proposed before but was previously rejected by the former aviation minister. However, AMCON remains convinced that merging these airlines and creating a national carrier from them is the most viable option, especially given the airlines’ current financial predicaments.

The possibility of converting Arik and Aero Contractors to national carriers has gained renewed attention as both airlines continue to struggle under the weight of their debts. According to Alade, AMCON had previously established a special purpose vehicle (SPV) for this conversion, but it was sold. Nevertheless, AMCON is prepared to create a new SPV to facilitate this transformation.

This move comes amid ongoing controversies surrounding Nigeria Air, a project launched by the previous administration just days before the end of former President Muhammadu Buhari’s term. The project faced significant backlash due to the involvement of Ethiopian Airlines, which held a 49% stake in the venture. Critics, including the House of Representatives, called for the suspension of Nigeria Air, citing concerns over its ownership structure and labeling it a potential fraud.

The new administration, under the leadership of Minister Festus Keyamo, has since put the Nigeria Air project on hold, emphasizing that any national carrier must be entirely Nigerian-owned and operate solely for the benefit of the country. This stance aligns with AMCON’s current focus on reviving Arik and Aero Contractors as potential national carriers, ensuring that these airlines remain under Nigerian control.

The decision to convert Arik and Aero Contractors to national carriers is driven by the pressing need to address their overwhelming debts. Arik, in particular, owes a significant sum to international creditors, including a $52 million debt to Afreximbank. AMCON has been actively negotiating with these creditors, but the challenges remain daunting.

The history of both airlines under AMCON’s management has been tumultuous. AMCON took over Aero Contractors in 2016 and Arik Air in 2017, following their inability to meet debt obligations amounting to billions of naira. Since then, AMCON has been working to stabilize the airlines, but the financial burden continues to weigh heavily on their operations.

To further complicate matters, Arik has faced legal challenges, including a recent court order that led to the grounding of its aircraft. This order, initiated by businessman Arthur Eze, stems from a $2.5 million debt owed to him by Arik’s founder, Johnson Arumemi-Ikhide. The ongoing legal disputes add another layer of complexity to the airline’s financial woes.

Despite these challenges, AMCON remains committed to finding a resolution. Alade mentioned that discussions with major creditors are ongoing, and the corporation is exploring all possible avenues to ensure that Arik and Aero Contractors can continue operating, potentially as national carriers that would serve Nigeria’s interests.

As the government continues to deliberate on the future of these airlines, the conversion of Arik and Aero Contractors to national carriers could mark a significant shift in Nigeria’s aviation landscape, ensuring that the country maintains control over its key aviation assets while addressing the financial crises that have plagued these carriers for years.