The Asset Management Corporation of Nigeria (AMCON) has joined stakeholders to call on the federal government to provide bailout for the aviation sector, noting that airlines and agencies in the industry critically need financial support in order to sustain their operations.
The call was made by the Executive Director in charge of Operations at AMCON, Mr. Aminu Ismail, who controls the aviation portfolio in the agency.
AMCON, which injected about N50 billion between 2012 and 2020 to stabilise the operations of the aviation sector in Nigeria, said air travel buoys the economy of any nation because it is the fasted means of transport and very crucial in the growth of nations.
Ismail said that it was AMCON’s intervention that led to the purchase of about $1 billion Non-Performing Loans (NPL’s) from Nigerian banks owed by major Nigerian airlines including Aero Contractors, Arik Air amongst others.
He added that although the aviation sector accounts for around eight per cent of AMCON’s restructuring portfolio, AMCON’s actions in restructuring the loans of airline operators protected a critical sector of the economy for Nigeria.
Ismail noted that given the critical nature of the essential services rendered to the economy by the sector, the objective of the intervention of the agency was to stabilise the operations of the airlines rather than realise the assets of the airlines in settlement of their outstanding debt.
In the process, he noted, there was huge cash flow, which is needed to run the sector effectively and efficiently, adding that 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 necessitated 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.
“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 taxations 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,” he said.
He remarked that with the advent of the dreaded COVID-19 pandemic, the challenges have now tripled, meaning that the leadership of any airline that wants to stay afloat must think differently and strategically to ensure that the airlines survive.
“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 informed of low-interest loans (with FX support) granted to strengthen the airlines in equipment overhaul, lease and purchase,” he said.