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We are cooperating with Nigeria Customs over $40million aircraft duty waiver allegations, says Arik Air in Receivership 

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2 years ago

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Arik Air Management under the Receivership of the Asset Management Corporation o0f Nigeria (AMCON), said on Friday that it is cooperating with officials of the Nigeria Customs Service (NCS), which is probing allegations of a $ 40 million duty waiver on one of its aircraft.
Some reports in certain platforms had given the indication that the airline management was under probe by the Customs on the vexed issue.
But, in a statement to shed light on the development, Arik Air Management in Receivership it is providing comprehensive details of the aircraft which clearly demonstrates  that there has been no misdeeds on the part of the receivership. The report alleged  misapplication of import duties and illicit sale of aircraft, by the management of Arik Air in Receivership.
The statement reads : In response to the accusations, the Arik Air under Receivership  feel compelled to clarify that duty waivers
granted to Arik  Air was before the receivership period, under the leadership of Sir Johnson Arumemi-Ikhide, were not properly documented and handed over to the receivership team as required by law.The management of Arik Air under Receivership stated that it  was Sir Johnson who pledged  the affected aircraft and engines to various local and international lenders, possibly in violation of the terms of the waivers.”
 It stated that the airline’s  financial struggles with local and foreign creditors have been well-documented, including enforcement actions against assets pledged to them, which may have enjoyed waivers. But, with changing dynamics in the global aviation sector, there is no more  complete duty waiver on commercial planes. It stated that protection for  mobile equipment, such as aircraft and its engines  referred to as Cape Town Protocol and Convention  are  intended to reduce risks for creditors, and consequently,borrowing costs to debtors, through the resulting improved legal certainty.
The arrangement  promotes the granting of credit for the acquisition of more modern and thus more fuel-efficient aircraft. The intention is to give international assurance to the effect that where a debtor defaults in the payment of loans or leases over a plane, the creditor can easily take possession of the plane. Debtors, the airline management under receivership said   were required to issue an Irrevocable De-Registration and Export Request Authorisation (“IDERA”) to lenders and lessors over the pledged planes, which  is judiciously managed in Nigeria by the Nigeria Civil Aviation Authority.
The statement further  reads : ” It is a false claim to suggest that a lender needs to go to court to enforce its rights under the
Cape Town Convention. The public is invited to note that it it amounts to slight of hand for a borrower to issue an IDERA, enjoy a credit facility on the basis of the security conferred by the IDERA, then behind the lender, enter into another arrangement that will prevent the peaceful enjoyment of the IDERA.
“We assure the public that Arik is not party to this. It is Johnson Arumemi-Ikhide that has done everything possible to prevent lenders from taking full benefit of their IDERA. If this farce is allowed, it portends grave dangers to the Nigerian aviation industry both in terms of access to leases and international aircraft financing.
The international lending and leasing community is keenly watching this unfolding episode. Allegations of Illegal Sale of Aircraft and Aircraft Parts by the Receivership It is crucial to dispel the baseless and unfounded claims made in the report regarding the sale of aircraft and aircraft parts during the receivership period. The facts surrounding specific aircraft transactions are  clear.
The Q-400, CRJ-1000, and CRJ-900 Aircraft Arik 's involvement with Export Development Canada  in a financing transaction for the purchase of specific aircraft types. EDC is a Crown Corporation of Canada. It serves as the export bank to support the production and export of made-in-Canada goods; Johnson Arumemi-Ikhide approached Bombardier, a Canadian company, to purchase planes for his aviation business; EDC was approached to grant loans to support the purchase request.”
Providing insight into the development, the airline said EDC agreed an acceptable structure to the lending requests taking into consideration Nigeria country risks,
EDC, Arik Air in Receivership said it agreed to extend loans to an entity called JEM Leasing Limited towards meeting Arik’s equipment needs.
” The company was registered as a special purpose company in a tax haven. Arik had no shares in the company; JEM Leasing Limited purchased two Bombardier Q-400 aircraft with one spare engine the “Q400 Aircraft” and one Bombardier CRJ-1000 Aircraft. These were pledged to EDC.
“Furthermore, Johnson Arumemi-Ikhide pledged two CRJ-900 Aircraft – the “CRJ Aircraft” –  owned by JEM Air Limited. JEM Air Company was also registered as a special purpose company in a tax haven. Arik had no shares in JEM Air Limited even though it was fully responsible for paying-off the loan on the planes owned by the company. JEM Leasing Limited leased the two Bombardier Q-400 aircraft with one spare engine -the “Q400 Aircraft” – and one Bombardier CRJ-1000 Aircraft to Arik in Nigeria.  IDERAs were duly executed in favour of JEM Leasing and EDC. These were duly noted by the NCAA . Arik paid lease sums directly to EDC in settlement of the loan obligations of JEM Leasing Limited to EDC.
“Johnson Arumemi-Ikhide, on behalf of Arik  -pre-receivership – approached the Federal Government of Nigeria for a waiver of customs duty on the planes.
“This was granted; Due to Arik 's financial difficulties, pre-receivership, they defaulted on the lease obligations related to the Q400 and CRJ 1000 Aircraft; Post-receivership, the receivership team, after initial struggles with meeting lease rentals on the planes, decided to exit the CRJ line of planes. It further agreed not to interfere with EDC’s mortgage rights over the CRJs.
“To come to the decision, the receivership team took into consideration the history of technical availability of the planes, the lack of capital by Arik to buy or effectively overhaul engines, and the need to reduce the complexity of Arik’s operations with several aircraft types in the fleet. An independent valuation of the planes by specialist international company was conducted; “EDC agreed to write off Arik’s outstanding lease obligations on the CRJ 1000 Aircraft owe to JEM Leasing Limited, which is under its control. Compared to their valuation, this was a good deal for Arik.

“EDC confirmed in a letter dated April 21, 2023, that they sold the two CRJ900 Aircraft. The decision to sell was made by EDC, not the receivership team of Arik; Regarding the CRJ1000 Aircraft, EDC negotiated with a buyer who chose to dismantle it into its constituent parts . It should be noted that JEM Leasing Limited, the owner of the CRJ Aircraft, confirmed in a letter dated May 5, 2023 that they sold the plane. The CRJ planes sold were not owned by Arik. The “Receiver/Manager could not have sold or passed title on assets that are not covered by his receivership; In summary, the sale of the CRJ Aircraft was a lender-led transaction. Arik only exercised its rights to exit an unprofitable lease arrangement. Thus, the assertion that the Receiver/Manager of Arik sold the aircraft is without merit. It is patently false.”

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It further reads : ” The allegation that the receivership team of Arik sold the Boeing 737-700 MSN 23640 aircraft with registration number 5N-MJI (“MJI”) is also baseless. The true circumstances surrounding MJI are as follows: The MJI was flown to Lufthansa Technik’s (LHT) facility in Malta for a C-Check in 2013, which was never completed. This occurred over 4 years before the commencement of
the Arik receivership in February 2017. Over time, mainly prior to the receivership, the aircraft was cannibalized, rendering it
unserviceable. The MJI lacked engines as they had been removed by the pre-receivership management of Arik; The MJI did not possess a valid Certificate of Airworthiness, and its cabin had been stripped in preparation for the incomplete C-Check; The aircraft was abandoned in a remote dump site at the Maltese Airport, due to infrastructure development by the airport authorities.
In light of these circumstances, LHT in 2020  -seven years after the commencement of the C-check –  advised a tear down to salvage parts from the plane; “Please note that it was uneconomical to overhaul the plane. In any case, Arik lacked the capital for such a venture. There was therefore no way of flying same to Nigeria,
“The Receivership Team conducted a valuation of the plane prior to the tear down. The value was near scrap at $1.55m. Therefore, rather than lose the plane to the aircraft graveyard in Malta, the Receivership Team authorized LHT to tear down the plane and salvage parts from the aircraft, with the intention of returning value to Arik. However, LHT withheld all salvaged parts to offset substantial debts owed to them by the pre-receivership team of Arik. Arik owed LHT over $34 million; and MJI was pledged to the Asset Management Corporation of Nigeria (AMCON).
“Arik is co-operating with the Nigeria Customs Service, in respect of these allegations and they are being provided with comprehensive details of the Aircraft, which will demonstrate clearly, that there has been no misdeeds on the part of the receivership.

We urge the public to disregard the sensationalized headline click-bait of $40 million duty waiver.  The duties are paid in Naira.  The use of inflated and unsubstantiated sums in newspaper headlines, particularly Sahara Reporters (SR) has been part of the strategy to tarnish the reputation of Arik Air Limited (in Receivership). The public is also advised to be wary of those who, if they cannot regain control of Arik would rather kill it.

We challenge SR to practice responsible journalism and have the courage to hear from the other side before publication.

Arik Air Limited (in Receivership) remains indebted to AMCON to the tune of over N240 billion. Together with Rockson and Ojemai Farms, all companies owned by Johnson Arumemi-Ikhide, they are indebted to the tune of over N400 billion to AMCON. Rather than engage in fruitless campaigns of calumny, they should approach AMCON to pay their loans.”

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