Nigeria’s largest airline, Arik Air, which has been struggling for months, has been taken over by the Asset Management Corporation of Nigeria (AMCON), a company originally set up by the Nigerian government in 2010 to help with troubled local banks.
Starting immediately, Arik Air will be managed by a government-appointed official, AMCON announced. The move, it argues, is necessary to avoid a collapse of the airline’s operations and by extension, Nigeria’s aviation sector. Arik Air accounts for 55% of Nigeria’s passenger traffic.
Taking over management of the airline will allow Arik Air to “avoid job losses, protect investors and stakeholder funds, as well as ensure safety and stability in the already challenged aviation sector,” AMCON spokesperson Jude Nwauzor says. For its part, Arik Air says it will challenge AMCON’s takeover in court.
Tough economic conditions in Nigeria have made the past year a difficult one for the country’s aviation industry and the travellers they serve. America’s United Airlines opted to pull out of Nigeria last May, citing difficulties recovering dollar profits given Nigeria’s restrictive foreign currency controls at the time, while Emirates Airlines cut down on local operations in October. Local airlines have also struggled with long-running jet fuel shortages as, amid a dollar crunch, importers have been unable to maintain supplies. Aero Contractors, Nigeria’s oldest working airline, suspended operations indefinitely last September citing “grave challenges.” Two weeks later, Arik Air temporarily shuttered operations for a day, due to insurance debt problems.
AMCON says its takeover of the airline is down to its “heavy debt burden,” which has left the airline unable to pay staff salaries and aircraft leases. Part of AMCON’s objectives after taking over Arik Air is for the airline to “go back to regular and undisrupted operations.” The airline has gained a reputation for delayed and cancelled flights.
News of Arik Air going into receivership comes only a few months after the airline laid out grand plans to expand its international routes and launch in initial public offering (IPO) within three years.