Reports from Nigeria’s local newspaper, Thisday suggest Ethiopian Airlines is in advanced negotiations with the Asset Management Company of Nigeria to take over nationalised Airline, Arik Air. Thisday reports, the deal has been in the works for month’s now with Nigerian officials visiting Ethiopia and vice n versa.
The nuggets
- AMCON is offering Ethiopian Airlines a management contract that will see it manage the operations of Arik.
- No monetary proceeds is expected to accrue to AMCON from this deal being a management contract. Thisday did not report if the fees payable to Ethiopian Airline has been agreed.
- The initial plans was to “handover” Arik to Ethiopian Airlines but the potential backlash and controversy surrounding such a deal killed off any possibilities of such a deal. Also, the hostility and threat of the previous management of Arik was considered bad for optics of any such takeover
- The management contract will involve Ethiopian airlines seconding some of its technical and management staff to Nigeria to run the airline. It will also include a code share arrangement.
- A code Share is essentially two or more airlines share the same flight where a seat operated by Airline A can be purchased from Airline B. For example, you buy a British Airways ticket but fly Iberia Airline, and American Airlines en-route to your destination all on the same ticket.
- Critics of this potential deal point to the Virgin Atlantic/Virgin Nigeria deal as a likely not benefiting Nigeria. They claimed Ethiopian Airline like Virgin will simply route traffic to their airlines without a commensurate benefit to Nigeria
- Supporters of the potential deal believe, Arik without a deal like this is essentially dead and that this could be the lifeline Arik needs.
- More from Thisday
AMCON made a loss of N351 billion for the period ended December 2016, mostly due to losses from its subsidiaries.
Arik air was founded in 2002, but commenced operations on the 30th of October 2006. In addition to flying within Nigeria, Arik also flies to several African countries including South Africa, Angola, Ghana and Liberia. AMCON took over the airline in February 2017.
Preliminary results from an audit show the airline has liabilities running into hundreds of billions of Naira, to parties within and outside the country.
AMCON was founded in 2010 to take over of bad loans from various commercial banks in the country. The bad bank has a lifespan of 10 years ending in 2020. MD of the bank, Ahmed Kuru had foreclosed the possibility of the extension of its tenure.
Arik ailine have a lot of problem.the first problem is that the board and the management personalized the company.it is managed subject not objectively.thet ignore the principle of running a business,the amcon should appoint a business consultant to review their operation with a clear business aim(2) they lost focus on their goal and aspiration(3) they should have given more power to the company,gives more value/a better trained staff/increases visibility they should have a short term,a medium term and long term business plan.
The short term is that,they had enter a virgin market,with no experiences in running an airline,they took over Nigerian airline overseas routes.i.e they should have seeks professional skill and opnion,maybe former Nigerian airways executive,also they should have pursued a massive sales driven,marketing and advertisement.they would have watches their operation daily,once they had establishes their niches,they should have a medium business plan. i.e,consolidation.cuting cost,expand slightly to fortifies their bases.with this reviewing medium businessplan,they will expand be able to compete with other airline.i.e would have seen new business.opportunities either through new routes or ventures or innovation
Arik was expanding due to bank loan not due to sales.they would have be able repair and services their plane solely in Nigeria,they would have seen when and what need to be done they,will able to restructure their debt.do they need to borrow more to cut their airline ticket fee,as the customer is the king in sales.they would have asked the govt to give them some protecting to increases sales or protect their market,and govt would have given some condition