Cally Air Operation Stalls Over N900m Debt To Aero Contractor, Planned Concession

Barely two years after it commenced flight services amidst fanfare and pageantry, operations of Cally Air, the state-owned airline of Cross River State may have run into a ditch over N900 million the airline owed one of its partners Aero Contractor.

Aero Contractor, the operator of the airline, had suspended operations in July 2022 over paucity of funds and foreign exchange challenge.

The airline had earlier in April 2022, halted flights into the Cross River State capital. The flight to Calabar from Lagos was operated with one of the two B 737-300 aircraft.

LEADERSHIP, also gathered from a usually authoritative source that the state government also planned to concession the asset of the airline but was stalled by Aero contractor refusal to support the concession because of the debt owed.

It could be recalled that the airline, which is being managed by Aero Contractors is at the centre of controversies as the outgoing governor, Ben Ayade, wanted its aircraft, Boeing 737-300 with the registration number: 5N-BYQ to be brought to Calabar for commissioning and eventual ‘concession’ exercise, it was learnt that the incoming governor suspected foul play in the entire arrangement.

Apart from this, the outgoing governor had earlier in the year listed some of the state’s assets to be concessioned to private firms and included Cally Air as one of such assets.

The plan to concession the state’s assets did not, however, go down well with some of its indigenes as one Mr. Mba Ukwenu, Senior Advocate of Nigeria immediately sued the State Government in court to stop it from going ahead with its plan.

Also, Aero Contractors, which has been operating and managing the airline since it signed a Memorandum of Understanding (MoU) with the State Government on April 30, 2021 for operations and maintenance of the airline until recently, is reluctant to release the aircraft to the State Government over an alleged breach of agreement by the government.

Our correspondent reliably gathered that the government owed Aero Contractors over N900 million for services rendered to it on the operations and maintenance of Cally Air for over 24 months.

The MoU was signed among Cross River state government, IRS Airlines Limited and Aero Contractors for the operation, commercial profit and maintenance of two Boeing 737 aircraft.

According to the MoU, the Cross River 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 the 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.

Our correspondent learnt that about two weeks ago, representatives of Cross River state government, led by Jake Ottu Enyia and Mr. Udiba 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 for concession,

However, Aero Contractor’s management were reluctant to the deal and LEADERSHIP gathered that the concession plan collapsed because they refuse to sign the deal.

When contacted, a top management staff of Aero Contractors confirmed the development with our correspondent, but declined to give more details.

The source told our correspondent that due to some disagreement with the State Government, Aero Contractors had suspended the use of the aircraft, which is at present still parked at its hangar.

According to the source, 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.

For IRS Airlines Limited; it is expected to get 5 per cent, while Cross River State Government would earn 85 per cent on the same conditions attached to Aero Contractors.

The source said: “The agreement between Aero Contractors and Cross River State Government has broken down over non-adherence to the MoU. The State Government did not pay for the maintenance carried out on the aircraft in the fleet of the airline, which is over N900 million.

“Also, the state government told the management to handover the aircraft to IRS Airlines Limited and prepare it for concession. But, the management insisted on the payment of debts owed before such a state could take place. As I am talking to you now, nothing concrete has been reached.”

The Cross River State Government acquired the aircraft from AirBatic on April 21, 2021.

The aircraft has 144 seat capacity in two classes configuration of business and economy seats.

The Cross River State Government had launched its airline, Cally Air, as part of efforts to boost economic activities in the state and across the country.

The maiden flight of the airline was operated to Margaret Ekpo International Airport in Calabar, the state capital in June 2021.

Ayade had said that it was a dream the government had in 2017, occasioned by the high influx of traffic into Calabar and the monopoly of some airlines dominating the Calabar route.