Nigeria: How Huge Debts Forced Jimoh Ibrahim to Ground National Airline

By Victoria September 20, 2012 10:52

Nigeria: How Huge Debts Forced Jimoh Ibrahim to Ground National Airline

Lagos — With 11 aircraft in its fleet, Air Nigeria no doubt was the second largest local airline in Nigeria. But it lacked managerial capability as recent happenings have shown. It has gone under now. Our correspondent takes a bird’s eye view on the many woes of Air Nigeria.

Air Nigeria was under Nigeria’s billionaire businessman, Barrister Jimoh Ibrahim. The barrister who is the chairman, NICON Group had before now acquired NICON Airways, the former EAS airline which has long gone under.

At a time he said NICON Airways was neither forced out of business by the regulators nor liquidated. He said he ordered its suspension to give room for its re-launch into the aviation industry. But that never occurred. When he acquired Virgin Nigeria and formed Air Nigeria, he promised merging the two to form a formidable airline. That never occurred either.
Ibrahim’s desire to play in the highly technical and volatile aviation industry kept growing. Even when industry watchers concluded that he didn’t have the capability to successfully run an airline profitably, he jumped at Richard Branson’s Virgin Nigeria when it was offered for sale in 2009.

After one year of intense discussions, Virgin Nigeria Airline sold its majority shares to Ibrahim and he effectively took possession of the airline on Friday, April 24, 2010. NICON group acquired the company with the sum of N37 billion (about $250 million). But he also inherited a life threatening debt of about $373 million from Virgin Nigeria.

It was said at the time he was fronting for certain interests. Whether he fronted for political interests still remains largely a conjecture. He ran the company his own way and ran it aground on September 10, 2012.
Air Nigeria had battled with debts in excess of N35 billion debts in unpaid taxes to the Federal Inland Revenue, four months arrears of staff salaries and pension remittances. Air Nigeria will remain half dead until September 2013 when the promoter hopes the company will come out of the life threatening coma.

How Air Nigeria got to this state can’t be pin pointed just yet. But recall Ibrahim, upon takeover of Virgin Nigeria told newsmen in Lagos on Wednesday, 28 April 2010 that his aim of acquiring the airline was to financially reposition it and save it from collapse.

He had allayed fears that the airline might not survive under him. He cited other businesses he had run successfully and concluded that Air Nigeria wouldn’t be any different.
“Our plan is to show that we can do it. Our plan is to stabilise the airline. Virgin Nigeria is not technically sick but financially sick and that is why we came in to stabilise it,” he had maintained.

Nigerian Civil Aviation Authority (NCAA) declared Air Nigeria insolvent and suspended its operations last June. He personally grounded the airline September 4 and sacked over 800 staff.

How did Air Nigeria woes start?
Recall the former Executive Director for Finance, Air Nigeria, Mr John Nnorom had alleged that airplanes in the airline’s fleet were not properly maintained, warning Nigerians to stop the airline until they were sure patronising the planes were properly maintained.
Nnorom revealed that of the 11 aircraft operated by Air Nigeria, only one, Embraer was safe to fly. “This explains why Air Nigeria has never operated more than six aircraft out of 11 aircraft. Air Nigeria does not have the money to fix these aircraft. Let anybody go and check now, some of the aircraft and engines have been grounded for the past one year,” he stated.

There were several other speculations on the integrity of Air Nigeria. At some point some of the engineers alleged they were being forced to release unserviceable aircraft to fly, allegation Ibrahim debunked. Some of the engineers even downed tools to press home this point They said of the 11 aircraft in the airline’s fleet, seven were serviceable, while four were unserviceable, adding that instead of allowing these aircraft with snags to go for maintenance, the management pressured the head of maintenance to operate the aircraft. Air Nigeria while debunking the engineers’ claim explained that the “dispute came about as a result of a management’s change within the airline’s maintenance department.”

Engineers went on strike. After about a week of crippling operations of Air Nigeria, another round of strike was called by National Association of Aircraft Pilots and Engineers (NAAPE). They were protesting non-payment of salaries and other welfare packages due to them by the management of the airline. A strike action, the management declared illegal.

The workers complained of delayed salaries of both local and foreign staff, pension deductions not remitted for over seven months, tax refund and tax clearance issues, co-operative deductions not remitted, staff travels unresolved and engineering tier system still pending.

Air Nigeria in a statement that said, “the strike action was uncalled for and a cheap blackmail by NAAPE as only one hour notice was given before the strike action was embarked upon.”

NCAA’s hammer
Shortly after the harvest of strikes on June 12, NCAA suspended Air Nigeria’s operations while it opened thorough auditing of its aircraft. The NCAA took the decision because Air Nigeria had not flown its aircraft for over a week following strikes by its pilots and engineers.

The Media Assistant to the Director General of NCAA, Mr Sam Adurogboye, had explained, “It’s a routine action to enable us look at them before allowing them to go back to operations having been on strike for days. This is normal.”
The spokesman for Air Nigeria Sam Ogbogoro told our correspondent on phone that there was nothing out of the ordinary about the grounding of Air Nigeria aircraft. But soon, the airline’s operating license to fly domestic and regional flights was suspended by NCAA on insolvency grounds.

While Air Nigeria was still dealing with the license suspension, Air Nigeria lessors, GE Capital Aviation Service (GECAS) recalled four of its aircraft. Air Nigeria was paying $181,000 monthly to GECAS for the deal. Air Nigeria said its lessors had been requesting to repossess the aircraft so it had to return them.

Ibrahim grounded air Nigeria, sacked 800 staff without benefits and set up a 50-member committee and tasked it to work out a process of re-launch of the airline after 12 months.
In suspending operations, he said, “Corporations are like individuals who naturally will get sick. The usual thing to do is to admit them in hospital, either for corporate surgery or for treatment, as the case may be.” He again assured the public of the airline’s resolve to return to full operations saying, “We are strongly committed to ensuring that Air Nigeria survives.”

By Victoria September 20, 2012 10:52
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