Ethiopian Airlines Is Bidding For Arik Air

Africa’s leading airline, Ethiopian Airlines, has said that it has submitted a formal offer to take charge of troubled local carrier Arik Air, which accounts for more than half of Nigeria’s air passenger traffic...

“We have outlined our terms and conditions to the Nigerian government and we are waiting to see if they agree,” Esayas WoldeMariam, the airline’s managing director of international services, told CNN.
“We are capable and desirous of handling the airline,” he stated.

WoldeMariam did not specify details of the offer, but added that he expected to face competition for Arik from international airlines.

Arik Air, Nigeria’s largest domestic and regional carrier, was taken over by the Asset Management Corporation (AMCON) last February, following the airline’s inability to repay a debt exceeding N350 billion to AMCON and other creditors.

AMCON said at the time that it had to step in to save the airline from failure. It removed the management and replaced it with a new team and receiver manager to oversee the operations of the airline.

At the time of its takeover, the federal government was keen on engaging Ethiopian Airlines under a technical and management contract to run Arik Air, but nothing was heard of the arrangement until the disclosure by WoldeMariam indicating that the East African airline had submitted a bid for Arik.

There are no indications yet that other foreign airlines have submitted bids to take over the Nigerian airline.
Arik’s AMCON-appointed Managing Director, Captain Roy Ilegbodu, reported in August that the company had stabilized under AMCON’s watch, with services running smoothly and salaries paid.

It now carries an average of 4,000 passengers daily and has the largest fleet of 14 aircraft, although according to Ilegbodu, 10 of them were operational at any time.

The Arik boss also spoke on the existence of a preliminary forensic audit report of the airliner carried out by KPMG.

“They have come up with a draft report and within the next few weeks, the final report will be out and will be available to the public,” he hinted.

However, when the Managing Director of AMCON, Mr. Ahmed Kuru, was contacted by FOW 24 Thursday on the bid by the Ethiopian airline, he said AMCON was yet to receive a bid from it or any other airline.

“We have seen the story but it cannot be true because we have not received a bid from the Ethiopian Airways,” he said.

When asked if there was a possibility that the East African airline might have approached the transportation ministry, he said AMCON would have been aware of the existence of a bid even if it was coming through the transportation ministry.

Another senior AMCON source informed FOW 24 that the reason the technical and management contract with the Ethiopian airline never saw the light of day earlier this year was because when AMCON took over Arik, it realized that the problems confronting the Nigerian airline were a lot more complex.

“When we took over Arik Air, we realized that the problems were very complex. Arik’s debt obligations were huge and remain huge.

“In fact, its debt profile is well in excess of its assets, so we need to reach an understanding on how to settle those liabilities to its obligors,” he explained.

He added that AMCON was focused on working with the financial advisers it has appointed on an exit strategy that would work for Arik and AMCON.

“We have appointed financial advisers – Renaissance Capital and Vetiva Capital – to assist us with an exit strategy. That is where we are right now with the airline,” the AMCON source said.
Ethiopian Airlines is Africa’s fastest-growing and most profitable carrier.

The airline reported a 10 per cent increase in revenue to $2.4 billion for 2015/16, with a 70 per cent rise in profits, while passenger numbers climbed 18 per cent to 7.6 million. The East African airline is pursuing an ambitious expansion programme in its home country, with the $345 million expansion of Addis Ababa’s Bole International Airport.

Abroad, the airline has acquired a 49 per cent stake in Malawian Airlines and 40 per cent of ASKY Airlines in Togo.