Aero stops operation, 1200 workers lose job
*Nigerian airlines insolvent, to cut jobs by 50%
*Why we suspend flights-Akinkuotu
*Unions accuse past mgt. of graft
*600 pilots roam the streets
Signs that virtually all Nigerian airlines are insolvent became visible yesterday as Nigeria’s oldest airline; Aero Contractors suspended all its scheduled operations as the carriers said it is ‘re-positioning to return to profitability’.
The implication is that over 1, 200 workers have been thrown into the labour market as the carrier has about 1, 250 workers.
Before now, Aero, which was one of the most stable carriers in Nigeria, had commenced the downsizing of its workforce by 50 per cent. Other airlines are said to be tinkering with the idea of cutting their workforce by the same number.
There are indications that more airlines may close shop before the end of the year, owing to economic recession, poor business plan, humongous debts and lack of support from Banks.
A mild drama ensued at the Murtala Muhammed Airport 2 terminal as passengers who were oblivious of the plan by the airline to shut operation besieged the counters of the airline to ask for refund.
A visit to the airline’s help desk at its headquarters at the Lagos office, a long queue of passengers were been re-imbursed.
Aero Contractor has been embroiled in serious crisis for the past years as the various aviation unions accused the past management of massive graft that has put it in dire straits.
The unions accused Oceanic Capital of using Aero’s name to take a loan from the defunct Oceanic Bank and transferred same to Oceanic Capital, which went on to purchase some planes and leased them back to Aero through Oceanic Leasing Company.
“This can be confirmed on the tag printed on the plane clearly stating Oceanic Capital as the owner of the plane. It was this loan that almost killed Aero not CHC as being speculated.”
“This loan was allegedly used to purchase seven B737-500from Arizona at an average cost of $12million each, but from the website of the firm from where the aircraft were purchased, they were going for about $4 million each.
“From records, a total of seven airplanes were purchased, but only six were received by Aero from Oceanic Capital on lease. Aero was paying a lease rate to Oceanic Capital monthly which almost wrecked the company and made CHC to withdraw as technical partner and took away all their equipment.”
The group further alleged that when Oceanic Bank was taken over by ECOBANK, all document relating to the deal were destroyed and the debt transferred to Aero
A source close to the carrier who spoke under a condition of anonymity put the airline’s trade debt at N20billion, adding the branded has been badly eroded over crises that has left the 57 year old airline in pitiable situation.
The source stated that the Assets Management Corporation of Nigeria (AMCON) took the best decision to suspend the airline’s operations to avoid a crash, owing to how badly the carrier was run.
According to the source,“AMCON is trying to make sure the airline returns strongly. There is no money to even pay off the workers. Aero is not planning liquidation. They want to clear their house to return strongly.”
The Chief Operating Officer of Aero Contractors, Capt. Fola Akinkuotu told New Telegraph the development was part of the strategic business realignment to reposition the airline and return it to the part of profitability.
This business decision, which is a result of the current economic situation in the country, he reiterated has forced some other airlines to suspend operation or out rightly pull out of Nigeria.
In the case of Aero, Akinkuotu said the airline had faced grave challenges in the past six months which impacted its business and by extension the scheduled services operations.
These factors, according to him are both internal and external environmental factors that have made it difficult for the foremost airline to continue its scheduled services.
He said during the period in review, Aero, which was hitherto revered for its safety, timeliness among other virtues witnessed epileptic operations and services to the external public that are caused by non-alignment of fundamental issue of the business, which in some cases have been frustrating and embarrassing to all parties including staff, customers and indeed all stakeholders.
As part of its resolve to ensure the airline survived unlike most other carriers that experienced short life span in the country, AMCON had appointed Mr. Adeniyi Adegbomire SAN as Receiver Manager in February 6, 2016, with the aim of turning the airline around.
Since AMCON’s intervention in Aero Contractors in 2011, it has provided support for the airline to meet working capital requirements and fleet expansion.
These were to ensure the airline remains a going concern providing services to various clients and the general public.
Unfortunately, the operating environment within and outside the airline have hindered any possible progress especially in the last six months when the Naira depreciated against the dollar thus making it impossible for the airline to achieve its operational targets.
With these realities coupled with protracted engagements with all relevant stakeholders, the Management of Aero has strenuously reviewed and assessed options and opportunities on ensuring viability, safety and sustainability of operations during the period with a lot of sacrifices.
“The impact of the external environment has been very harsh on our operational performance, hence management decision to suspend scheduled services operations indefinitely effective September 1, 2016 pending when the external opportunities and a robust sustainable and viable plan is in place for Aero Contractors to recommence its scheduled services.
“The implication of the suspension of scheduled services operations extends to all staffs directly and indirectly involved in providing services as they are effectively to proceed on indefinite leave of absence during the period of non-services,” the Chief Executive Officer stated.
He added that “We are aware of the impact this will have on our staff and our highly esteemed customers, hence we have initiated moves to ensure that we are able to return back to operations within the shortest possible time, offering reliable, safe and secure operations, which the airline is known for.”
As at today, over 600 commercial pilot certificate holders are without jobs, owing to the fact that the number of airlines in the country has reduced by over 60 per cent of what it was a decade ago.
The airlines passing through financial turbulence are finding it difficult to approach banks to rescue them following huge indebtedness to various financial institutions.
Some of the loans are classified as non-performing and consequently, they have been refused fresh loans.
Nigeria’s airline industry owes banks and government as much as $2 billion after funding rapid expansion with short-term loans, leaving some firms struggling, industry and financial sources say.
In Nigeria, commercial banks, which are profit-oriented and without huge financial base are reluctant to lend such long-term loans to airlines and this has hampered air transportation in the country. The situation is not helped with the risks associated with air transport in the country.
So, lack of adequate funding has led to the short life span of many airlines, in addition to bad business plan and technical failure; it has also led to the many air crashes suffered by airlines.
The airline industry in Africa’s most populous nation a few years ago saw explosive growth. Unstable currency of late has further minimised the survival prospect of carriers.
The naira, which trades at N310 per dollar at the interbank market, exchanged at N410 per dollar last Friday.
Also, high cost of funds is also a direct hurdle to profitability in every sector, but it is hardest hit in aviation.
The explosion then saw older domestic names such as Aero, Chanchangi and IRS fighting competition from new players such as Arik, Dana and Virgin Nigeria. Chanchangi, IRS and Virgin Nigeria have all gone into extinction.
The expansion gave Nigerians a wider choice of airlines, many of them flying with relatively new and refurbished aircraft, helped reverse the country’s dismal reputation for air safety in the wake of a spate of crashes.
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