Posted by Nkem Osuagwu on
Aviation Development Company Plc (ADC), the first airline to be listed on the Nigerian Stock Exchange, is sourcing $30 million (about N3.9 billion).....
Aviation Development Company Plc (ADC), the first airline to be listed on the Nigerian Stock Exchange, is sourcing $30 million (about N3.9 billion) through a mixture of equity funding from the Nigerian capital market and long-term finance from international financial institutions to enable it to finance acquisition of new Boeing 737-300 aircraft through a lease/purchase agreement.
Mr. Mfon Udom, managing director and chief executive of the airline, said this in Lagos yesterday, remarking that the capitalisation will be used to finance the company's expansion programme and enhance its profitability. He said the company would approach the capital market in the next two months to raise N2.4 billion while the balance of N1.5 billion would be sourced from international financial institutions.
The managing director said after acquiring the four aircraft, the company would be buying only new aircraft, adding that the company will place order for new ones so that they will receive them in the next two to three years because it takes about two years for Boeing to produce them.
He said the recapitalisation is part of ADC's strategic plan to recapture its dominant position in the West African regional market as well as exploit the intercontinental Lagos-Brussels route, on which it is Nigeria's designated flag carrier.
The chief executive said the motivation for the development of the Lagos-Brussels route, in the absence of a flag carrier designation from the London route is to compete for a share of the lucrative Lagos-London traffic which is currently dominated by British Airways and Virgin Atlantic and other European airlines which ply the London traffic through their home capitals.
He added that ADC planned to exploit this market in partnership with a reputable European carrier.
Udom said apart from the acquisition of new aircraft, part of the proceeds of the capital issue would be used to finance upgrade of information and communication technology (ICT) and ticket reservation system.
The managing director said the enhancement would simplify the company's operations by making customers to pay online by visiting the company's website.
The chief executive said the federal government recently allocated 11 new routes to ADC. The routes include: Cotonou, Accra, Dakar, Libreville, Banjul, Monrovia, Bamako, Abidjan, Conakry, Bissau, Sal (Cape Verde), Freetown and Brussels.
He said as soon as the company received the new aircraft, it would start the new routes in phases, adding that the company had earlier started the Libreville route but had to suspend operations on the route at the end of July 2005 in a bid to harmonise its operations with the company's general objectives and values.
Udom said the aviation sector was going through a promising period following shifts in government policies that is helping to create enabling environment for investors in the sector.
"Safety in the aviation industry was misinterpreted, but today, we are focusing positively on safety. Government is key to the industry and it is now contributing positively to its growth. The safety audit of all airlines in the country is a positive step to help move the airlines to where they are supposed to be", he said.
He said the relative stability that has been achieved on foreign exchange rates is a positive development for the aviation industry as it would improve the capability of the indigenous airlines to import aircraft spares as well undertake the maintenance of their aircraft, adding that the custom processes on imported goods are also being simplified based on government's reform agenda.
During its financial year ended December 31, 2005, ADC recorded a turnover of N3 billion as against N3.2 billion in the corresponding period of 2004
Also, it recorded a profit after tax and exceptional item of N133.7 million in 2005 as against N22.65 million in 2004.
The board will be recommending for shareholders approval at the yearly general meeting slated for next week an increase in the authorised share capital of the company from N300 million to N1.3 billion.
The board will also ask the shareholders to empower it to issue up to 2.4 billion shares through either rights issue or public offer or a combination of the two and to effect appropriate changes in the memorandum and articles of association (Memart) of the company subsequent to the increase in share capital and new issues.
ADC was incorporated in December 1984 as a passengers, cargo, charter and training aviation services company. It was listed on the NSE in September