Aviation faces Nosedive as Air Peace CEO Battles US Fraud Charges

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Hard times could hit the local air travel sector following fraud and money-laundering allegations against Air Peace airline’s boss, Chief Allen Onyema. The criminal indictment, which came to the fore at the weekend, have sent shivers down the spines of stakeholders who have begun pondering the fate that awaits the airline amid other implications for local, regional and international travel in the country.

This is the gravest accusation against a major airline that has over 50% dominant share of the Nigerian domestic market and its operations.

 

Aviation sector analysts specifically feared a ripple effect on Air Peace and its operations; including imminent cancelation of $20 billion worth of aircraft acquisition deals with Boeing and Embraer, credibility challenges against Nigerian operators overseas, and the future of over 5000 direct and indirect employees of Air Peace, should the Onyema be convicted.

 

The US Department of Justice indicted Onyema for fraud and laundering over $20 million from Nigeria through US bank accounts in a scheme allegedly involving false documents for the purchase of airplanes.

Onyema, 56, and the airline’s Chief of Administration and Finance, Ejiroghene Eghagha, 37, were indicted on November 19, on a one-count charge of conspiracy to commit bank fraud, three counts of bank fraud, one count of conspiracy to commit credit application fraud and three counts of credit application fraud.

 

In total, Onyema was charged with 27 counts of money laundering, while Eghagha was charged with one count of aggravated identity theft. Onyema has, however, denied the charges of fraud and laundering. A statement issued by his attorney denied the report and said plans were on by Onyema and the co-accused to “vigorously defend” themselves against the charges.

 

A source at one of the local airlines told Huhuonline.com that it was not the first time such accusation would be made against a Nigerian airline. He recalled the cases of Aero Contractors and Arik Air, with the later indebted in excess of over N300 billion prior to their takeover by the Asset Management Company of Nigeria (AMCON).

 

But “it got us more worried to see that this is coming from the United States and directed at the only airline and our sole representative on the international route. I know of international aviation politics and it is real. But in this matter, such an argument begs the question. This is the United States’ system that we are dealing with. My main worry is what will happen to the industry, should the allegations creep in on the airline’s operation. We are certainly going to be in for capacity crises that will trickle down to the traveling public and the economy at large. That is why I think the Federal Government must wade into the matter, understand whatever it is and manage the situation,” he said.

 

The concern stems from the comparative edge in fleet capacity the embattled Air Peace airline has over other operators, put together. The other eight airlines have a total of 28 aircraft compared to Air Peace’s over 30 in operations, and another 42 on firm order. In jeopardy already is the acquisition plan for 10 new B737 MAX state-of-the-art aircraft signed with Boeing last year. Each plane costs between $99.7 million and $134 million depending on specifications. Altogether, the planes would cost the airline roughly $997 million.

 

On April 4, 2019, the carrier announced it had signed a $2.1 billion (N756.5 billion) worth of agreement with Brazilian aircraft manufacturer, Embraer, for the purchase of 30 new planes. According to the airline, the order was for 10 brand new Embraer 195-E2 aircraft and comprised purchase rights for a further 20 E195-E2 jets. Last week, at the Dubai Air show, Embraer made the announcement that Air Peace had signed a contract for three additional E195-E2s. According to the carrier, these were part of Embraer’s 2019 fourth-quarter backlog with a list price of $212.6 million. In total, an investment of over $2.6 billion could go down the drain as airlines make a significant amount as a down payment of the cost of aircraft when they make firm orders.

 

The Secretary-General of the Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), also expressed the fear that the allegations might have far-reaching consequences for the aviation industry in Nigeria. Ojikutu said the situation could push back the daily traffic by about 50 per cent or more if the CEO does not defend himself without involving the airline. He also noted that the case could seriously affect the airline being a single ownership management carrier.

 

“The airline business is a cut-throat business that survives on very thin margins. So, when an airline is blooming in naira while expending in dollars, you have to ask questions. Trust me, the questions in the minds of those who know the industry did not start today and this has nothing to do with where he (Onyema) is from. The US does not take these issues lightly. It is a shame though that we may possibly face another reduction in the already low stock of commercial passenger aircraft.

 

“More so, hard times await any politician that has a hand in this pot of mess. The indictment says “known and unknown persons” are connected. They have not mentioned the names of the unknown persons but I am sure those are individuals, who are under separate money-laundering investigations,” Ojikutu said. The former commandant at the Murtala Muhammed International Airport, Lagos, also said that the new allegations further exposed the complicity of the Nigerian Civil Aviation Authority (NCAA), which has both safety and economic regulation oversight in the industry..