ARIk: Who Will Cast The First Stone?

The cacophony of reactions generated by the takeover, on February 9, of Arik Airlines is symptomatic of the crisis of confidence that Nigerians have in their relationship with corporate organizations and the government. While scores of people see the takeover as a welcome development, appreciative of the challenges of the airline over time, other read some grand conspiracy to the whole exercise.

These mixed reactions are further fueled by the claims of the Asset Management commission of Nigeria, AMCON, to justify the takeover. The agency says Arik is indebted to the tune of N300 billion, having not been able to fulfill its debt obligations to lessors, the Lufthansa technical team that manages its fleet, government agencies, suppliers, and staff.

The management of the airline, however, says its debt profile is exaggerated and swears to contest the takeover in court. It has, however, behaved as a law abiding corporate citizen by respecting the court order empowering AMCON to take charge.

TELL Cover Page

TELL Cover Page

AMCON says the takeover was to save the airline from total collapse. We hope that is the objective and pray it is achieved. For while we agree with the agency that Arik is too critical to be left to crumple, we are not excited by the antecedents of AMCON in bringing about turnarounds as are now being enunciated by it. The fate of Aero Contractors Airline is a case in point.

And that also is an indication that passengers who had been enamoured of the safety and first class facilities of the airline may not have back their beloved airline in the best form soon. The fear, therefore, is that Arik, as we know it, even with its failings, may sadly have been gone for good. It is not only the passengers who will feel the pangs of the development; the Nigerian economy will, as well, take a beating even as proprietors of the airline will by now be having a sense of déjà vu, and, perhaps, now recalling what they did not do right to arrest the situation. The impact on the economy may not be easily discernible in an environment where statistical evaluations of social processes are hardly given preference.

[ctt template=”3″ link=”V3X4g” via=”no” ]Aside from indebtedness, Arik has been accused of failure in corporate governance. The management of the airline has not addressed the issue well enough. Perhaps, that is even true of almost all private companies in this clime, itself a reason why a lot of them run into crisis when the founders die or even as they approach old age.[/ctt] But that, we believe, echoes the challenge of the micro-society that stands aloof when a corporate citizen comes into the system, with government often failing in its responsibilities to regulate properly, collect taxes or even protect the interest of the workforce.
Or how else can the authorities explain the laxity in the remission of taxes to airport authorities as well as deductions from staff salaries to the relevant government agencies? If the bailout of the airline by AMCON empowers it to sack its management and take over the company, should it not have encouraged the same agency to be involved in the running of the airline ab initio?

Now, the fact is that Arik is not alone in the indebtedness to AMCON. There are some other airlines and, in fact, companies outside of the aviation sector. We worry that if the main objective is to wait until a beneficiary of AMCON intervention flounders so it can be taken over, then the public fund used in bailing out these companies may be said not to have been judiciously utilised?

We even think that since intervention in the sector has not been known to yield the desired results of turning ailing airlines around, the authorities should have begun to think out of the box, rather than pump in funds that they know will not achieve results and, thereafter, send in people who may not be better managers to revamp the ailing company.

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