Africa: Arik, Aero merger for national carrier foreclosed
The Federal Government has foreclosed the possible merger of two of the country’s local airlines, Arik Air and Aero Contractors Limited, into a national carrier, says Minister of State for Aviation Mr Hadi Sirika.
Sirika, who is on a country tour of aviation sector projects initiated by the Buhari administration, said in Lagos that the large indebtedness of the two local airlines to creditors as well as pending litigation in courts had forced the government into foreclosing the merger option as suggested and demanded by industry stakeholders.
Sirika said the Buhari administration would instead resuscitate the suspended Nigeria Air project as part of its second term vision for the aviation sector.
“The suggestion that Aero and Arik Airlines, which are under the control of AMCON, should be merged to form a national carrier is not tenable as the national carrier would get entangled with the huge indebtedness of the airlines and other encumbrances,” Sirika said.
“But is there is need for the Nigerian government to have a carrier? The answer is yes. We are yet to have a carrier that would meet the needs and yearnings of Nigerians since the liquidation of Nigeria Airways about 15 years ago,” the minister added.
Sirika said while the estimated funding requirement for Nigeria Air remains $300 million, the government would provide $55 million of this funding through a Viability Gap Funding which, he noted, was not up to the proposed five per cent equity for the Federal Government.
Sirika said the Nigeria Air project was not suspended because it experienced investor apathy, with many international financial institutions, reputable airlines and private entrepreneurs indicating interest in taking up the available 95 per cent private sector equity.
The aviation minister, while acknowledging that there might have been plenty of misrepresentation and mistrust by the Nigerian public on the financing of the national carrier project by government and its private sector partners leading to its suspension, said the Federal Executive Council has directed that funds be provided for the take-off of the project.
“The national carrier project will proceed to the procurement phase in a transparent manner,” said Sirika.
“The Ministry of Transport will restructure the funding arrangements in a manner acceptable to both government and private investors for the take-off of the airline,” he added.
In recent months there has been increased demand by aviation sector stakeholders for a government regulated merger of the two airlines into a national carrier to stem the continuous loss to the economy in capital flight to foreign airlines estimated at over $1.7 billion annually.
Poor capitalisation and inadequate fleet capacities have rendered the existing nine local carriers incapable of reciprocating the BASA agreements existing between Nigeria and some 83 countries with the lucrative London, New York, Dubai, Johannesburg routes completely in the monopoly of foreign operators.
By Louis Ibah