Arik Air (W3, Lagos) has denied claims it diverted USD40 million worth of import duties from the illegal sale of aircraft but is cooperating with the Nigeria Customs Service (NCS) in investigating the allegations.

In a statement, the airline - in the receivership of the state-appointed Asset Management Corporation (AMCON) - said it had provided comprehensive details of the aircraft under investigation to the NCS, "which will demonstrate clearly that there have been no misdeeds".

The airline was responding to a report by Sahara Reporters on October 3 that the NCS was investigating Arik Air over claims it abused a tax waiver when it allegedly sold three aircraft -B737-700 5N-MJI (msn 28640), CRJ900 5N-JEB (msn 15059), and CRJ900ER 5N-JEA (msn 15058) - using fake documents. The NCS duty waivers were limited to the import of aircraft and spares by domestic airlines.

Arik Air rejected the accusations, explaining that duty waivers granted to them before the receivership period were not properly documented and handed over as required by law. They noted that Arik Air founder and chairman Johnson Arumemi-Ikhide had pledged various aircraft and engines to local and international lenders, thereby possibly transgressing the terms of the waivers.

"Arik'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. It is also worth mentioning that as of today, there is a complete duty waiver on commercial planes." The Receivership clarified that lenders under the Cape Town Convention do not need to go to court to enforce their rights, but borrowers must issue an Irrevocable De-Registration and Export Request Authorisation (IDERA) to lenders and lessors over pledged planes.

Regarding allegations of illegal aircraft and parts sales during the receivership, Arik Air in receivership provided detailed information about the sales of the three aircraft, explaining that the transactions were lender-led and not the decision of the receivership team.

It said Arumemi-Ikhide had secured loans from Export Development Canada (EDC) to purchase the Bombardier Aerospace jets. The loans were extended to a special-purpose vehicle called JEM Leasing Limited. "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," it explained. "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."

It added: "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 a specialist international company was conducted. 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," it noted.

The receivership further dismissed as "baseless" claims that it had sold the B737-700 (5N-MJI). It said the aircraft underwent a C-Check at Lufthansa Technik's facility in Malta in 2013, but the check was never completed, well before the Arik receivership started in February 2017. Over time, before the receivership, the aircraft was cannibalised, making it unserviceable. It had no engines, lacked a valid certificate of airworthiness, and had its cabin stripped for the incomplete C-Check. The aircraft was abandoned at a remote location at Malta International due to infrastructure development.

In 2020, seven years after the C-Check began, Lufthansa Technik recommended tearing down the aircraft to salvage parts because it was economically unviable to overhaul it. Arik lacked the capital to bring the plane back to Nigeria. The receivership team conducted a valuation before the tear-down, finding its value close to scrap at USD1.55 million. Rather than losing the aircraft to the aircraft graveyard in Malta, the receivership team authorised the tear-down with the intention of returning some value to Arik. However, Lufthansa Technik withheld the salvaged parts to offset USD34 million owed to them by Arik. Additionally, the B737-700 was pledged to AMCON.

The ch-aviation fleets module confirms 5N-MJI was scrapped at Malta International in August 2020. CRJ900 5N-JEB is now owned by Avmax Aircraft Leasing and flying as YI-BAE with Fly Baghdad (IF, Baghdad), while 5N-JEA is stored at Lagos.