Controversy Over Cally Air Assets, N900 Million Debt to Aero Contractors

Tue May 30th, 2023 -

Cross River state-owned airline, Cally Air, might have run aground after two years of operations and operational debt in excess of N900 million to its technical partner, Aero Contractors.

Though the airline last operated in April 2022, its asset is currently at the centre of bickering between the outgoing governor, Prof. Ben Ayade, his successor, Governor Bassey Ottu, and Aero Contractors.

The Guardian learnt that while the outgoing administration wanted Cally Air’s only surviving asset, a Boeing 737-300 with the registration number 5N-BYQ, to be brought to Calabar for project commissioning and “concessioning” exercise, the Ottu group and some stakeholders kicked against the move. A source close to the Ayade-led administration said that the governor had been consistent with the plan to concession the airline.

However, the concession agenda at the twilight of the administration drew the ire of some indigenes, who filed a suit challenging the concession bid. Aero Contractors, which has been operating and managing the airline, following a Memorandum of Understanding (MoU) with the State Government on April 30, 2021, has seized the aircraft over alleged breach of agreement by the government and failure to remit N900 debt.

It was learnt that the government owed Aero Contractors the accumulated sum for operations and maintenance services in the last 24 months of Cally Air. It will be recalled that the MoU was signed between Cross River State Government, IRS Airlines Limited and Aero Contractors for the operation, commercial profit, and maintenance of two Boeing 737 aircraft belonging to Cally Air.

According to the tripartite agreement, the state government acquired two airplanes: 5N-BYQ and 5N-GRS, and selected IRS Airlines Limited as its consultant and asset manager, while Aero Contractors was designated as the operator and expected to provide licenses, permits and certificates necessary for the airline to operate a passenger transport aircraft.

The B737-300 with registration number: 5N-BYQ is still parked at the Aero Contractors hangar, while the other B737-300 with the registration number: 5N-GRS is at the graveyard of the Murtala Muhammed Airport (MMA), Lagos, due to its non-airworthiness.

About two weeks ago, representatives of Cross River State Government, led by Jake Ottu Enyia and Effiong Udiba, Commissioners for Aviation and Asset Management and Recovery, respectively, held a meeting with the management of Aero Contractors management on the possibility of returning the aircraft to Calabar for concessioning,

The Aero Contractors’ management agreed to the deal, but demanded commitment on the payment of N900 million outstanding. Sources confirmed that the Cross River government failed to pay the airline for maintenance of the aircraft while the sharing formula agreed by the duo was not equally honoured.

It was learnt that the agreement stipulated that as the operator, Aero Contractors would be entitled to 10 per cent of net sales after deductions of all taxes and charges and all operations expenses as well as any fixed amount due to Aero.

A senior official at Aero Contractors, yesterday said: “The entire arrangement, was not tidy ab initio. There are so many agents and interests in the investment. I was not there when it was concluded. If I was there, I would have asked for a full dry lease of the two aircraft, which would enable us manage them 100 per cent, and pay to the state government.

“But they extended the arrangement to a third party, which they dubbed coordinator. I still don’t understand what that means. The arrangement is not favourable to Aero. I learnt it is also not favourable to the Cross River State government.

“So, the arrangement is not transparent or sustainable, and that is why we may not operate the aircraft again; unless they are given to us on dry lease, which is an arrangement that is obtainable globally.”




source: Guardian