SATURDAY Vanguard, AUGUST 22, 2015—13
Continues from page 12 CEO of the Virgin Group, who stood side-by-side with the President at the Villa. Thus, ended Yuguda’s South African Airways adventure; the failure and closure of the sixth attempt at floating a replacement national carrier for the ill-fated Nigeria Airways. OBJ/Branson’s Virgin Nigeria: (2004) – Our Failed Attempts Conceived by President Obasanjo and the CEO of the Virgin Group, Richard Branson in 2004, Virgin Nigeria was the 7th attempt to float a replacement national carrier for the liquidated Nigeria Airways. After the theatrical Villa presentation of the miniature aircraft bearing the insigma of Virgin Nigeria by OBJ and Branson, the Memorandum of Mutual Understanding (MOMU) was signed and the concept formally came into being September, 2004. However, it was not until July 2005 that the airline commenced operations. To facilitate the operation of Virgin Nigeria, the government agreed to terms that stunned all discerning Nigerian aviation professionals and even the global aviation industry. Under the terms, the Virgin Group led by Branson was given a free hand to design and determine the structure of the airline even when its equity was to be 49% against Nigeria’s 51%. The Group had the right to lease all aircraft, manage the airline, determine the roadmap, the routes and its focus. Also Branson’s Virgin Nigeria was given the right to all Nigeria’s 64 BASA then and first option of choice on any new BASA. In addition, Virgin Nigeria would operate all its domestic flights from the international terminal of MMA where the “E” Wing was redesigned for Virgin Nigeria. The objective was to facilitate easy transfer of Virgin Nigeria passengers booked for international flights onto Virgin Atlantic; the Group’s flagship in which Nigeria had no interest. Although, the then Aviation Minister – Isa Yuguda, had taken responsibility and had dragged Rewane of Financial Derivatives as Financial Advisor into it, all the planning processes were entirely the affair of Branson and his Virgin Group. There was no Board, the entire Management was drawn from the Virgin Group, emoluments were fixed by the Group and the only Nigerian brought into the Management on a façade was Larry Agose, one of the best Public Relations Professionals that ran Nigeria Breweries public relations. But until then, he had no exposure in aviation. It is also true that UBA was both the Airline’s Banker and a Coinvestor; the bank had no scintilla of knowledge on airline matters and therefore had no input in the direction of the airline. The Ohiwere-led Board was a development that came after all major decisions had been taken for commencement of operations. The entire industry from AON, groups and individual professionals protested the embarrassing antipatriotic terms given to Branson to no avail. Even letters written to the President received very non-positive responses. One such response which came from Profession Ahionbare, Special Assistant to the President, stated inter alia, “I assure you we will do what is in the best interest of Nigeria.” An aviation activist, Capt C M Y K
•Jerry Agbeyegbe
JERRY AGBEYEGBE:
Mur dered while ffighting ighting Murdered to save Nigerian Air ways Airw Jerry Agbeyegbe went to court, seeking to stop Virgin Nigeria, but four days to the case coming up, Agbeyegbe was murdered in cold blood, a murder that remains, unexplained and unsung till date. In spite of all these, the airline commenced operations July 2005 around its strategic plan to be a feeder/distributor of passengers to Virgin Atlantic as well as an instrument to combat British Airways dominance in Nigeria. The airline built one of the best infrastructures for airline operations and easily achieved dominance on the domestic and West Coast routes where it was easily the first choice airline. But in keeping with its roadmap, in spite of the government’s pressures to operate international routes which it had no intentions to do, the Virgin Group though, started flights to London, Dubai and Johannesburg, it ensured that these routes were shoddily operated with a rickety B767 as against the modern A330 it was using for Virgin Atlantic. Again, in the case of London, it transferred Virgin Nigeria flights from Heathrow to Gatwick which was second rate to Heathrow. Thus, the Virgin Group deliberately created conditions for poor patronage, poor revenue and operational losses, all of which it used as alibi to pull out from all the routes pleading lossmaking. It is informative to recall that Virgin America floated
by Branson made a loss of US$250million between 2007 and 2009 in its first 2 years, yet it continued and now thrives. Right from the first year of operation, Virgin Nigeria went into heavy borrowing from its bankers – UBA. This was predicted as the start-up fund, was paltry and was irresponsibly used by the Virgin Group managers of the airline. Between December 2005 and March 2006, UBA approved a fourmonth bridging loan of US$20miilion as working capital, financing and aircraft guarantee. This was followed with another US$40million in 2006 and yet another US$100million zero coupon bond issue. There is also the US$100million facility from Cairobased AFREXIM Bank, obtained by UBA ostensibly on behalf of the airline. When the burden of debt became excessive to UBA, the Virgin Group managers sought a facility of US$15miilion from GTB in a manner that was so unethical and unbecoming of a Group whose global perception is that of a benchmarker. As at the time that the Virgin Group sought the facility, all the assets of Virgin Nigeria were encumbered in an unperfected “All Asset Debenture” instrument held by its bankers – UBA as security for the US$200million loans it granted the airline. The Virgin Group managers of the airline, not only concealed this fact from GTB, but presented some of the same encumbered assets to the bank as collateral for the
the Virgin Group deliberately created conditions for poor patronage, poor revenue and operational losses, all of which it used as alibi to pull out from all the routes pleading lossmaking
US$15million facility. Immediately the facility was granted, UBA perfected the “All Asset Debenture”, which included uncalled capital, thus rendering GTB’s US$15million absolutely unsecured. This criminal act of deliberate concealment, never experienced before in the banking history, and perpetrated by an otherwise perceptively reputable foreign investor-group, left GTB no option than to head to the court to force payment. The US$15million is today part of the unsecured N35billion debt stock of Virgin Nigeria held by AMCON, which Nigerian tax payers have to liquidate. However, more contributory to the indebtedness and eventual failure of Virgin Nigeria were the lease terms of the aircraft the Virgin Group acquired for the airline’s operation, particularly the seven Boeing 737s. From records available, the lease terms were inexplicably at variance with all known global standards and even the Virgin Groups standard. Against global standards of 3 years lease tenure, Virgin Nigeria leased for 5 years. Against global standard of monthly lease term of 120 block hours, Virgin Nigeria’s was 200 block hours even when actual utilization was between 100 and 130 block hours monthly. Yet, the unutilized hours ranging between 70 and 100 block hours were paid for even when the aircraft were out of service due technical (AOG). Further investigations showed that as against the standard monthly lease rate of US$125,000, the Virgin Group managers paid US$181,000 in addition to US$151,000 monthly maintenance reserve, bringing the total monthly expenditure for each of the seven B737s to US$332,000. Thus, annual payment for each aircraft came to US$3,984,000 and US$19,920,000 for 5 years tenure per aircraft and US$139,440,000 for the seven B737s for the 5-year tenure. Industry projection is that Nigeria lost over US$60million to this murky lease arrangement; an amount that became part of the N35billion debt of the airline. By 2007/2008, the Virgin Group had started complaining of its “lossmaking” Nigerian venture. Consequently, it took a decision to exit having seen the imminent collapse of the airline it ran. UBA Capital had planned an IPO, which it projected would fetch them US$450million but the then Board led by Mr. Ohiwere saw through the “hidden agenda” in the plan, headed to court and botched the IPO. The Virgin Nigeria got its bankers to arrange a 2-year convertible bond of US$100,000. Once the sum was available, UBA took US$20million upfront as interest and charges, the Virgin Group took US$35million (US$24m+US$11m, ostensibly to cover respectively its equity contribution for its 49% stake in the airline and for brand royalty fee for Virgin Nigeria’s use of its brand). The Group claimed it was for lease rental payment. Once Virgin Group took this money, having more than recovered its investment, it withdrew from Virgin Nigeria, recalled the entire Management, all of whom were the Group’s staff (CEO, Conrad Clifford on June 18, 2009 and others on July 4, 2009) and demanded, under a threat of litigation that its brand be immediately taken off from the airline. This exit left the entire burden of the airline on UBA which
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