Nigeria's Finance Minister Kemi Adeosun, who had a road show trip to Washington D.C. some days ago, stated that interests from Private Equity Investors were at all time highs over offers for the future of local airlines, Aero Contractors and Arik Air. Both airlines are currently under management by AMCON, having been taken over after their loans became non-performing.
Arik Air which was taken over earlier in the year by AMCON owes local banks and international creditors over half a trillion...and yes..that's a Tee..naira. Aero Contractors on the other hand owes loans to local banks 20 billion naira and another 15 billion naira to AMCON which was converted to equity in the airline.
Regardless of these huge figures, both airlines still remain very attractive businesses to buy for a host of reasons.
Firstly, these airlines have a very large fleet size transversing local, regional and international routes (in the case of arik) and with arik's air modern fleet, any investor would rather get them into service than spend money purchasing new aircrafts. Also, there is a teeming huge customer base for these airlines. They are very well known with a fairly good brand value, hence the advertising cost that would hitherto have been spent setting up a new airline would ordinarily be saved. This would translate to a quicker return on investment for any investor.
The Nigerian airspace has a very large passenger traffic; this is always a key ingredient for consideration for any investment in a sector of an economy. The statistics from the Nigerian Bureau of Statistics for Q4 2016 showed that over 15.2 million passengers passed through our airports with 72% of this being domestic passengers.
Also the planned concession of the airports means that these airlines would be even more attractive as major airlines could use them as regional hubs for their operations.
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