AMCON Injects ₦50bn, Seeks Bailout For Nigerian Airlines Post-COVID-19

AMCON Injects ₦50bn, Seeks Bailout For Nigerian Airlines Post-COVID-19

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Post Views: 208 The Asset Management Corporation of Nigeria (AMCON), on Wednesday, said it has injected so far about N50bn solely to stabilize the nat...

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The Asset Management Corporation of Nigeria (AMCON), on Wednesday, said it has injected so far about N50bn solely to stabilize the nation’s aviation sector to stabilize airline operations in the eight years between 2012 and 2020.

According to Aminu Ismail, Executive Director, Operations at AMCON, the intervention led to the purchase of about US$1bn Non-Performing Loans (NPLs) owed Nigerian banks by major Nigerian airlines, including Aero Contractors, Arik Air, amongst others.

Ismail, who spoke during a panel discussion at an aviation webinar organised by Aelex Group in collaboration with SY&T Communications Media Partners, said although the aviation sector accounts for around 8% of AMCON’s restructuring portfolio, its efforts at restructuring the airline loans protected the critical sector.

Given the critical nature of the essential services rendered to the economy by the sector, he explained that the intervention was to stabilize the operations of the airlines rather than realize their assets in settlement of their outstanding debts.

In the process, he added that huge cashflow is needed to run the sector effectively and efficiently, following which additional loan was advanced to support the growth of the airlines, ensuring fleet expansion, job retention and job creation.

However, Ismail said when the airlines failed to repay the loans, AMCON was left with no other choice, than to appoint Receiver/Managers to manage them pending its planned divestment.

Speaking further at the webinar themed “Flying into Turbulent Skies, Safely Navigating COVID-19 Headwinds: Survival Strategies for Nigerian Aviation,” Ismail also highlighted the challenges faced by aviation in Nigeria given AMCON’s experience since it intervened in the sector.

He said, “Aviation in Nigeria has historically been fraught with many challenges, including poor capital structure, difficulty in accessing finance, difficulty in accessing cost effective leases, high insurance costs, difficulty in accessing forex for maintenance and spare parts.”

He listed other challenges of the industry as “multiple taxation by government agencies, weak corporate governance structure, lack of airport infrastructure and very marginal share of the lucrative regional flights of under 20%.”

With the advent of the dreaded Coronavirus (COVID-19) pandemic, Ismail said the challenges increased significantly, following which the management of any airline that wants to stay afloat must rethink its strategy.

Notwithstanding the low income levels of the government resulting from the significant fall in crude oil prices, which is Nigeria’s major revenue source, Ismail said AMCON is in support of the call by industry stakeholders for bailout packages by the Federal Government. Already, the airlines operators are threatening to cut jobs by as much as 60% as part of measures to stay afloat.

Such bailout, he warned, should be strategic, lamenting that the previous bailouts given out between 2009 and 2012 by the Bank of Industries (BOI), as well as the Power And Airline Intervention Fund (PAIF) of the Central Bank of Niger (CBN) were mismanaged by the airlines.

Continuing, he AMCON boss said while some of the airline managements failed to meet the repayment obligations of such facilities, others simply diverted the funds at the detriment of the aviation sector.

AMCON, he stressed further, supports any government bailout “that would ensure the continued survival of the airline industry in Nigeria. However, any intervention in the aviation industry this time around must be directed at the core areas of need and should not become a jamboree.

“If the intervention comes in the form of grants, it must be to fund operational losses, which must be basically intended to save jobs and reimburse for operational losses induced by the COVID-19 pandemic, and to promote local content.”

Also important, he said, is the need to ensure that the intervention focuses “on reducing dependence on foreign companies for pilot training and aircraft maintenance.

“For us, development of Nigerian based simulator capacity and C-Check for various Boeing aircraft types should benefit from government support. But should the government decide that their intervention will come by way of loans, it should be inform of low interest loans (with FX support) granted to strengthen the airlines in equipment overhaul, lease and purchase,” he argued.

Insisting that liquidity would be key factor for airlines to resume operations after COVID-19, Ismail said “any governmental intervention should be now (and) must not be used to resuscitate airlines that had stopped operations before COVID 19 broke out.

“Intervention for public good should be directed at aviation companies with large labour force and who carry the most passengers in the country; the government should not use its fund to support luxury consumption like charter firms that service the rich; intervention from government should not be merely for loan restructuring but must be directed to the airlines, to grow the economy just as its disbursement must be controlled and strictly monitored by a regulator. Like I said earlier, the intervention should not be a jamboree,” he concluded.

Industry experts on the webinar panel moderated by Fubara Anga, Head of Transport & Finance Practice, Aelex Group, were Bismarck Rewane, CEO, Financial Derivatives Company; Ado Sanusi, CEO of Aero Contractors; Chris Aligbe, CEO, Belujane Konzult and Capt. Dapo Olamide, CEO, Ropeways Transport Limited. Others were George Uriesi, CEO Ibom Air; Olumide Bolumole, Head, Listing Business at the NSE.

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