Six years after the Asset Management Corporation of Nigeria took over the management of Nigeria’s major carrier, Arik Air, the court has ordered that the agency should give account of the period it operated the airline, a development that may lead to the return of the airline to its founder.
On Wednesday, the founder of Arik Air, Sir Johnson Arumemi-Ikhide, made his first appearance in the airline premises, located at the domestic wing of the Murtala Muhammed International Airport, Lagos, after six years that the Asset Management Corporation of Nigeria (AMCON) took over the management of Arik Air in receivership.
During the visit, Arumemi-Ikhide along with his team, held a brief meeting with the management team of Arik Air under AMCON receivership.
Last week Friday, Justice Ambrose Lewis Alagoa of the Federal High Court, Lagos gave AMCON 14 days to render Arik Air’s accounts since 2017 take-over and insisted that the attempt by the federal government agency to transfer the assets of Arik Air Limited to NG Eagle Airlines (third defendant) and Super Bravo Limited (fifth defendant) was not in the best interest of Arik Air.
The Court granted some of the prayers of the plaintiffs, Sir Johnson Arumemi- Ikhide and his wife, Mary Arumemi Ikhide, ordering the defendants (AMCON) to render accounts and/or deliver returns to the Corporate Affairs Commission covering the entire period of receivership over Arik Air Limited within 14 days of making the order.
The court also ruled that the transfer of Arik Air Limited assets to NG Eagle Limited, Super Bravo Limited (fifth defendant) was done in bad faith and a violation of Omokhide’s fiduciary duty to Arik Air Limited as a whole imposed by section 553 of CAMA 2020.
The founder of Arik Air, Johnson Arumemi Ikhide, and his wife, Mary Arumemi Ikhide (Plaintiffs) had filed upon the originating motion summon dated December 14, 2021 prayed the court that the duty imposed on the first defendant (Kamilu Alaba Omokhide) by section 553 of the CAMA 202O to act in the best interest of Arik Air Limited as a whole includes the duty to act in the best of the plaintiffs (Arumemi and Mary Ikhide) as members of Arik Air Limited.
The plaintiffs claimed that the transfer of Arik Air Limited assets to NG Eagle (third defendant) and to Super Bravo Limited (fifth defendant) “was done in bad faith and a violation of Omokhide’s (first defendant) the fiduciary duty to Arik Air Limited as imposed by section 553 of the CAMA 2020”.
The plantiffs also sought a declaration that Omokhide, the Receiver/Manager appointed by AMCON is liable for any losses suffered by Arik Air Limited and its members as a result of the transfer of Arik’s assets to NG Eagle Limited.
The Arumemi Ikhide’s further sought a declaration that by virtue of section 533(1) of the CAMA 2020, Omokhide is an agent of AMCON, stating that the second defendant AMCON is vicariously liable for the acts of Omokhide.
The plaintiffs noted and sought a declaration that in spite of the appointment of Omokhide as Receiver/Manager of Arik Air Limited, the organs of Arik Air Limited, including directors and shareholders subsist.
Other declarations by the plaintiffs are that the directors and shareholders of Arik Air Limited, including the plaintiff (Arumemi-Ikhide and Mary Ikhide), still have rights and powers regarding Arik Air Limited; setting aside the transfer of Arik\ assets and a perpetual injunction restraining Omokhide to the fifth defendant from further transferring the airline’s assets to NG Eagle.
AMCON reacts
Reacting to the judgment, AMCON said it would appeal the judgment, stating
that the judgment clearly and without equivocation, affirmed that AMCON was competent and empowered to appoint the Receiver/Manager of Arik, that the appointment by AMCON was proper, and that the continued operations of Arik are not affected.
“Put simply: the judgment does not affect the operations of Arik or the powers of the Receiver/Manager to superintend the affairs of Arik” the statement said.
AMCON also said the judgement did not rule against the appointment of the Receiver/Manager of Arik or “grant all the prayers of the Plaintiffs”. The Court did hold that the Receiver/Manager was obligated to act in the best interests of Arik and other creditors – a point that AMCON, and the Receiver/Manager have never disputed.
“In any event, AMCON and the Receiver/Manager are dissatisfied with certain parts of the judgment relating to AMCON’s dealings in specific transactions concerning limited assets. We are exercising our constitutional rights to appeal, in respect of these.
“The public should bear in mind that the issues under appeal have no bearing on the continued operation of Arik as a company in Receivership – as the Court has already affirmed the Receivership”, the statement also said.
Industry stakeholders however, blamed AMCON for lack of accountability and noted that the government agency, which projected that it would stay about two years to recover its monies owed it by Arik Air has stayed for over six years without any timeline when it would hand over the company to the original owner.
Unjustified Takeover
Former Executive Director of AMCON, Abba Jega, in a recent television interview, said the decision for AMCON to fully take over the Arik Air might not have been the best decision. He also said that it is difficult for government agency to successfully operate an airline, which is a special kind of business, which owners sustain their operation because of the passion they have for the business; not just the money, noting that money alone could not guarantee the success of an airline.
According to Jega, “Airline business is a special kind of business, except the owners have a passion for it and is also very honest. Money alone does not solve the problem of airline business. Problems that are managerial and have to do with human resources, money cannot solve them. It is not as if CBN did not intervene in some of these cases. But CBN did change the rules at the time Arik Air and some other debtors took some facilities from the banks that were not cash. They were guarantees, but CBN changed its risk profile. CBN realised that there are some transactions that were not cash but had tendencies to crystalise into cash and the could destabilise the banking industry. Perhaps with the benefits of hindsight what should have happened with those guarantees is that when they were being taken over from the banks they should have been sterilized but that was not done so they became binding on the airlines to the extend they felt the airlines would not be able to pay the loans and they took over the airlines. They were special cases and I think with the benefits of hindsight some of the guarantees should not have been converted into cash as loans.
“What I am going to say now is my opinion. The belief in the design of AMCON at the beginning was that after saving the banking industry, every businessman that has bad debt with AMCON should be given an opportunity to work their way out of the loans, including giving them extra financial support to do so. What I suspect that might have happened was that the time reached when a new government realized that it would not continue to go that way and therefore became impatience with some of those businesses and they put them in receivership, but in the original design any business that is sincere and has good business plan should be allowed to work his way out. But I think there is element of perhaps, impatience. That was why some drastic action was taken on some of the businesses.”
Jega further said: “Without fear of contradiction, government is not a good businessman. Government should limit its role as a regulator. Whenever government tries to get involved in the business there is bound to be complications. It is more of an issue of passion that keeps airlines afloat. So if you as a lender or you as a government decides to take over and airline, there are bound to be complications because you cannot run it the way the person who has set it up will run it and therefore what I would have expected; maybe a better way would have been government to work with the owner to resolve issues with the owner instead of outright take-over. It is not too late to go back to the table for renegotiation; a receivership is not a liquidation; a receiver manager should review the loan. If it is paid back the asset goes back to the owner. But if it realized that the fortunes of the business are getting worse under receivership, it is good to have further renegotiation on that.”
NG Eagle
A day before the court decision, the Nigeria Civil Aviation Authority (NCAA) issued Air Operator Certificate (AOC) to NG Eagle dated September 21, 2021 with AOC number NGE/AOC/09-21/001 almost one and half years after NG Eagle carried out demonstration for the AOC and few months the airline was sold to a new operator, House of 5As by AMCON, a hitherto local aircraft leasing company.
NG Eagle was registered by the Asset Management Corporation of Nigeria and ceded about five aircraft owned by Arik Air, which is under the receivership of the federal government agency, to the new airline.
After obtaining its Air Transport Licence (ATL), NCAA did not give NG Eagle AOC after it allegedly met the requirements and was expecting the certificate to start operation in 2021, but NCAA on Thursday last week surreptitiously issued AOC to NG Eagle under a new ownership.
It was learnt that the initial plan under AMCON was to cede eight airplanes owned by Arik Air to NG Eagle. Four were taken to the Ethiopian Airlines maintenance facility in Addis Aba for change of livery, while the fifth was to be ferried there also when the process was stopped.
When THISDAY spoke to the General Manager, Public Affairs of NCAA, Sam Adurogboye, he said was not aware that NCAA gave AOC to NG Eagle.
“I am not aware AOC was given to NG Eagle. I am in Abuja. There is nothing like that to my knowledge,” he said.
“What was done with NG Eagle was conflict of interest as the court noted. They moved Arik Air asset to NG Eagle. That was asset stripping. In fact, the entire Arik Air compound is a crime scene. By that judgement the sale of NG Eagle has been nullified. They wanted to use it to offload Arik Air assets,” another stakeholder told THISDAY.
Many industry observers are aghast at the issuance of AOC to NG Eagle, which was contrary to the decision of the National Assembly in 2021 that AOC should not be given to the airline and there is no indication that that decision was vacated before NCAA issued AOC to NG Eagle.
“What was surprising was that the airline did not any new demonstration before AOC was issued to it,” industry insiders wondered.
The Takeover
AMCON took over Arik Air premises on February 9, 2017 and a confirmed source told THISDAY that since then the new management of the airline has not been filling annual returns and accounts to know the financial status of the airline. At the time AMCON took over the airline it had 17 airworthy aircraft, including Boeing B737-700, 800, Bombardier CRJ 900, 100 and Bombardier Q400 and staff of over 3200.
The source that spoke to THISDAY said some of the aircraft had been cannibalized and sold while existing ones not in use were not put in proper storage, which means that some of them might have been damaged beyond redemption. THISDAY observed the pictures of one of the cannibalized aircraft, which is no more part of the fleet.
The airline acquired nine Boeing 737-700 and 800 NG at average of $40 million each, four Bombardier CRJ 900, and two CRJ 1000, two Hawker Business Jets, two Airbus 3030-300, two units of Airbus A340-500 and four Bombardier Q400 (Bash 8) aircraft.
“In the course of receivership, the fleet was reduced from 17 aircraft to four currently,” the insider told THISDAY.
