The Asset Management Corporation of Nigeria (AMCON) has given support to stakeholders in the aviation sector calling on the federal government to bailout the industry due to the impact of the coronavirus outbreak.
Aminu Ismail, the AMCON’s Executive Director, Operations, gave the corporation’s backing during a Webinar on the Nigeria’s aviation industry on Wednesday.
Ismail said AMCON had injected around N50bn into the aviation sector solely to stabilize airline operations in the country between 2012 and 2020.
Ismail said AMCON was in support of industry stakeholders that are urging the federal government to provide bailout packages to airlines who are currently threatening to reduce staff number by as much as 60 per cent.
But as the federal government contemplates the bailout proposal, he said the federal government must be guided and more strategic this time around given that the previous bailouts that were given to domestic airlines in the country between 2009 and 2012 by the Bank of Industry (BOI), as well as the Power And Airline Intervention Fund (PAIF) by the Central Bank of Nigeria (CBN) were mismanaged by the airlines.
He said they either failed to meet with the repayment obligations just as some of them diverted the funds to other areas to the detriment of the aviation sector.
He said, “AMCON is in support of any bailout from the government 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 – the intervention should focus 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,” the AMCON director said.
According to Ismail, AMCON’s intervention led to the purchase of about US$1bn Non-Performing Loans (NPL’s) from Nigerian banks owed by major Nigerian airlines including Aero Contractors and Arik Air amongst others.
He said, “Although the aviation sector accounts for around 8 per cent of AMCON’s restructuring portfolio, Ismail explained that the AMCON’s actions in restructuring the loans of airline operators protected a critical sector of the economy for Nigeria.
“Given the critical nature of the essential services rendered to the economy by the sector, he explained that the intervention objective of the government recovery agency was to stabilize the operations of the airlines rather that realise the assets of the airlines in settlement of their outstanding debt.”
In the process, he stated that the huge cashflow, which is needed to run the sector effectively and efficiently, additional loan was further advanced for the purpose of providing support towards growth of the airlines, 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, which necessitating the appointment of Receiver Managers to manage the airlines pending AMCON’s divestment.
He 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, 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 per cent.”
With the advent of the COVID-19 pandemic, Ismail said the challenges had now triples meaning that the leadership of any airline that wants to stay afloat must think differently and strategically to ensure that the airlines survives.
Ismail was one of the panelists at an aviation webinar organised by Aelex Group in collaboration with SY&T Communications Media Partners.
The webinar, which was themed “Flying into Turbulent Skies, Safely Navigating COVID-19 Headwinds: Survival Strategies for Nigerian Aviation,” also featured other industry experts such as Mr. Bismarck Rewane, the CEO, Financial Derivatives; Mr. Ado Sanusi the CEO of Aero Contractors; Mr. Chris Aligbe, CEO, Belujane Konzult and Capt. Dapo Olamide, CEO, Ropeways Transport Limited.
The rest include Mr. George Uriesi, CEO Ibom Air; Mr. Olumide Bolumole, Exco Member of NSE and Divitional Head, Listings Business. The webinar was moderated by Mr. Fubara Anga, Head of Transport & Finance Practice, Aelex Group.