The Buhari administration may be considering merging some of the biggest debtor airlines in Nigeria including Arik Air, Aero Contractors, Chanchangi Airlines, among others to form one national carrier that provides service to Central and West Africa. The Ahmed Joda-led Transition Committee submitted a report two weeks ago briefing the Presidency on the condition of six of Nigeria’s leading airlines, recommending the bold action.
Nigeria’s six leading domestic airlines are faced with huge debts totaling approximately N130 billion. All of the airlines were required a financial bailout from the Asset Management Corporation of Nigeria (AMCON). The Federal Ministry of Aviation submitted a debt portfolio of five of the airlines with AMCON totaling over N190 billion.
Details of the Aviation Ministry audit findings showed Aero Contractors’ debt stood at over $200 million (N308 billion), with 60% of its equity already taken over by AMCON, while Arik Air has been $600 million (N924 billion) in debt; IRS Airlines, $55 million (N84 billion); Chanchangi Airlines, $55 million (N84 billion), and bankrupt Air Nigeria owing about $225.8 mn (N347.7 billion).
There are reports that the struggling airlines recently approached AMCON once again for a multi-billion Naira bailout to handle their outstanding debts to aviation agencies like the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), suppliers, and other institutions.
The Joda Committee advised the Buhari administration to establish a public-private partnership (PPP) with all the airlines affiliated with AMCON in order to subsidize a national carrier. The Committee said that the action should be carried out in six months.
The Committee believes that the PPP would increase government revenue from the sector, reduce capital flight, grow the local aviation industry, and create more jobs for Nigerians. It was prescribed that the Infrastructure Concession Regulatory Commission (ICRC), works with the Ministries of Aviation, Finance, Industry, Trade and Investment in order to establish the PPP.
The report also highlighted inefficiency as one of the key obstacles that the aviation industry has to deal with. It said about 75 percent of passenger traffic was generated from three airports; Lagos, Port Harcourt and Abuja, while over 90 percent of the revenue earned came from Lagos and Abuja.
The Committee also recommended that the National Civil Aviation Authority (NCAA) reviews the N7 billion capital expenditure required to improve the infrastructure of both domestic and international airlines.