The crisis enveloping the local aviation industry is deepening with two of the top operators - Aero Contractors and Virgin Nigeria - now mired in corporate instability that is threatening to ground their operations.
Following the inability of Aero Contractors and Oceanic Bank plc to agree on the terms of payment and servicing of $200 million credit facility granted to the airline for aircraft acquisition, the airline on Monday said it has approached the Minister of Aviation, Fidelia Njeze, National Security Adviser (NSA) Aliyu Gusau and Harold Demuren, director general of the Nigerian Civil Aviation Authority (NCAA), to intervene in the matter, which they see as capable of grounding its operations if not resolved immediately.
And at Virgin Nigeria Airways (VNA) which was bought over by Jimoh Ibrahim, group managing director of NICON Group, its managing director, Dapo Olumide, has resigned his appointment with the airline. This is a fall out of the buy over of the airline by Ibrahim at a cost of $5 million at the weekend. Following the weekend takeover, the new management immediately redeployed the airline's executive director of finance, who was earlier seconded to the airline from UBA, the airline's former creditor.
"He (Olumide) is definitely leaving and the industry is concerned about this", the source said. Aero Contractors, one of the major indigenous airlines, is locked in a negotiation with Oceanic Bank over the attempt to convert the credit terms for the acquisition of new planes into loans.
Dapo Olumide
The credit facility was for the acquisition of some Boeing 737 aircraft for the airline's operations. Aero is known for its regional and strong presence in domestic operations with its strong fleet. The new management of the bank which was appointed by the Central Bank of Nigeria (CBN) after a bail out had sought to convert the terms for the acquisition of the new aircraft into loans.
"Aero has been locked in discussions with its bankers for some months now and it has now reached a point where it is difficult for Aero to operate on these terms. The dilemma centres on the allocation of historical debt. The management teams at Oceanic Bank and Aero have been in constant dialogue about this matter for the past six months. However they have been unable to agree on a resolution that will allow Aero to continue trading as a going concern.
"Regrettably Oceanic took unilateral decisions on the morning of Friday 23 April, 2010, which have effectively prevented Aero from paying her suppliers and lessors , including Canadian Helicopter Company (CHC)," the airline said.
It has therefore approached Njeze, Gusau and Demuren "in the belief that they will intervene as an arbitrating party between Aero and Oceanic", the airline said. Shaf Sayed, managing director of Aero, stated that the airline needs to complete the full cycle of turn-around that was started last year, adding that the company has a new management with a new vision, and is in the process of bearing the fruits of financial success.
"Despite the difficult situation that Aero finds itself in today, I am sure the strategic importance of Aero Contractors to the national economy will be appreciated and good sense will prevail all around. We have every confidence that Aero will be able to set itself on a good platform and we look forward to a bright future, serving a third of the Nigerian Oil & Gas industry and 1.5 million passengers each year", he said. Olumide joined Virgin Nigeria in November 2008 as chief commercial officer after a stint as a banker with the Africa Finance Corporation (AFC), specifically in the area of transport infrastructure project development. Dele Ore, an aviation consultant, who reacted to the development expressed worry that the airline's lot might go worse at the exit of Olumide.
"As far as I am concerned, Virgin Nigeria is the best run airline in Nigeria and has met IATA Operational Safety Audit (IOSA) requirements. To me, that is an airline that is qualified to be an airline in Nigeria. "So if Olumide was able to sustain and maintain it, we should say that we commend his effort. If he leaves nobody is indispensable though, but to me it will be a very sad story and we will be going in circles and that airline will be worse off for it", he said.
Chris Aligbe, another analyst noted that though it would be difficult for him to predict the consequence of Olumide's exit, "he and his team met a very bad situation and they have battled all their lives to salvage that situation. If it were not for the albatross of the debts accumulated by Virgin Group, the Nigerian Eagle would have stood out clearly, showing that people who know what they are doing are in place; they have a good roadmap and they were battling to stay on that road map.