Aviation intervention fund fraudulent, says AMCON
Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr. Ahmed Lawan Kuru, has urged government not to tinker with the idea of bailout for airlines, adding that the last intervention fund given to airlines in 2007 was a fraud.
Kuru, in a paper presented as at the 3rd edition of the Nigeria TravelsMart Colloquium organised by the Nigeria a Travel Market (NTM), alleged that the beneficiaries were yet to account for over N120 billion given to them to revive their airlines.
The money was released by the Central Bank of Nigeria as part of a N500 billion intervention fund. Ten airlines benefited from the fund through loans with tenure of 10 to15 years. The loan was monitored by the Bank of Industry.
Out of the 10 airlines, three, Air Nigeria, Chanchangi Airline and IRS, have folded up. Other beneficiaries are Arik, Dana, Aero, Kabo, Overland, First Nation, Odengene.
A source in the Ministry of Transportation, who spoke to Woleshadare.net on strict condition of anonymity, said: “What is unbelievable as discovered is that these monies were transferred out of the country; the monies were transferred into private accounts, transferred into foreign banks and used to buy private houses.”
Kuru further stated that it was totally unnecessary, saying, “criminals came forward to access the funds. If the Nigerian Civil Aviation Authority (NCAA) does not do what is good, good corporate governance which many airlines lack would continue to lead to failure of airlines.
“The last aviation intervention fund to airlines was a big fraud. The beneficiaries are yet to account for the funds. It was totally unnecessary as criminals came forward to access the funds.”
He said it was high time the government, the regulatory agencies and practitioners realised the important role of aviation in the development of a nation.
He said: “The aviation sector is a catalyst for the economic development of nations. It is a wheel that drives economic activities.
“It facilitates trade, tourism, boosts productivity in the economy, improves efficiency in the supply chain, it is an enabler for investments and can spur innovation. Critically, it is a source of quality employment. For these reasons, it is a strategic sector deserving of a careful plot to greatness if Nigeria is to occupy its rightful place in the comity of nations.”
The AMCON boss, whose presentation was themed “Corporate Governance and Airline Industry development in Nigeria,” also said that aviation regulatory bodies like the Nigeria Civil Aviation Authority (NCAA) must develop the courage to insist that corporate governance is adhered to adding that the industry is riddled with thousands of airline businesses that have failed due to lack of corporate governance as most board of directors are represented by family relations such as father, mother, son who have no competence to manage a business as fragile and sensitive as aviation.
Kuru listed other challenges to include lavish lifestyle of owners of airlines, which he said takes precedence over payments of pilots and engineers; owner of airline and staff becoming contractors for services thereby compromising standards, the Chairman of the airline taking decisions to buy aircraft that runs into several billions of naira without due diligence just to mention a few.
He said: “The Board of Directors are represented by father, mother, son who have no form of aviation/airline training to qualify to be on the Board in the first place. Also lifestyle of owners takes precedence over payments to pilots and engineers, among others.
“Owners and staff are contractors for service, thereby compromising standards and quality. In most cases, overpricing services. Airline staff become flight ticket agents, in most cases creating artificial ‘full capacity’ situations where when passengers eventually board, a lot of seats are empty.”
According to Kuru, the trend is that in such airlines without structure, staff loyalty is only to the owner, not to the company. Proper attention is not paid to suppliers of parts, lessors, line maintenance providers, while fuel suppliers, are not paid as at when due.
Once the airline operates this sort of structure, vendors he said would naturally withdraw all forms of business support and the airlines tether to the point of failure.
He therefore called on NCAA to step up on regulations like has been done in the banking sector.
Kuru said it was critical this happens because “the Aviation industry is as important as the health industry because it deals with the lives of travellers. It requires more regulation than even the banking industry.
“It is only in Nigeria that an airline can abandon you at the airport for over five hours without any recourse. Indeed, there are consequences for frequent cancellations, however I cannot recall any airline punished in the recent past.”
