'Aero Contractors' Assets Were Overpriced'

The Asset Management Corporation of Nigeria (AMCON) may have lost about N25 billion for taking over the debts of Aero Contractors, one of Nigeria’s major airlines, according to sources familiar with the deal, who said the assets worth less than N4 billion, but were overpriced.

According to Thisday, investigations revealed that AMCON after paying the huge amount of money controlled only 40 per cent stakes while the Ibru family retained controlling share of 60 per cent until AMCON re-evaluated the sale and took over 90 per cent stakes.

Initially AMCON was asked to pay N35 billion for the assets including what the source described as the company’s goodwill, which was outrageously put at billions. It was gathered that the government agency paid N29 billion, but industry sources said at the time of the transaction, the total assets of Aero was about N4 billion.

“What are the criteria for buying over a debt that cannot be substantiated in assets and at the same time give the Ibru’s 60 per cent of the stakes? But now, it has been taken up to 90 per cent controlling shares and that was why they wanted to make the airline a national carrier after it was re-evaluated by AMCON,” an industry source told THISDAY.

According to the source, AMCON’s decision to pay so much to take over the airline was not a good one, given that the money could have been enough to start five new airlines.

“The money AMCON paid was enough to float at least five new airlines with each one operating not less than five Boeing 737 aircraft on lease. But now that the organisation has taken over the majority shares of the airline, it has set up new set of people to run the airline. The account manager is now taking decisions and there is an effort to turn the airline around,” the source added.

THISDAY also learnt that Aero is yet to get out of its financial quagmire. Out of about 10 aircraft in its fleet, only five are operational while the others need maintenance.

Aero is the oldest airline in Nigeria that is still in operation and it really commands goodwill and royal customers. Aviation experts have expressed the hope that with the new management in place, the airline would be “built into a strong airline that would take back about 29 per cent of its market share in due time.”

But the airline, THISDAY gathered may over time make a positive turnaround but the new management is said to be unwilling to accept more credit from AMCON, which has expressed intention to inject more funds into the airline.

“I am not sure that the aircraft on ground have engine problems but they all need maintenance and the airline needs money, but I learnt the management is not willing to take money from AMCON and banks are no more willing to lend money to airlines these days. Perhaps, the management thinks that it can soldier along with the aircraft they already have and as they generate revenue they carry out repairs until they are able to bring all the aircraft into service,” the source said.
Culled from Thisdaylive.com