The Managing Director of Assets Management Corporation of Nigeria (AMCON), Mr. Ahmed Kuru has shared some examples of poor corporate governance in Nigeria’s aviation industry, calling for an urgent effort by the Nigerian Civil Aviation Authority (NCAA) and other stakeholders towards addressing them.
Speaking at the Nigerian TravelMart Colloquium 2018 held in Lagos last Tuesday, Kuru identified areas of corporate governance violation which have made most Nigeria’s airlines to fail over the years.
“Board of Directors are represented by “Father, Mother, son” who have no form of Aviation/ Airline training to qualify to be on the Board. Lifestyle of owners takes precedence over payments to Pilots, Engineers etc. Owners and staff are contractors for service, thereby compromising standards and quality. In most cases, overpricing services. Staff become flight ticket agents, in most cases creating artificial “full capacity” situations. Staff loyalty is only to the owner, not to the Company. Suppliers of parts, lessors, line maintenance providers, fuel suppliers, are not paid as at when due. They withdraw support and the airlines tether to the point of failure. Routes are opened without proper study thereby resulting in additional expense instead of income. Most airlines enter into trouble the moment they enter into the international route, where it is difficult for them to compete. Decisions to expand fleet and commit millions of dollars are taken by an individual without deep analysis. Funds of the company are not separate from that of the owner. Operators are not aware of account management. No clear remuneration structure for Directors and Management. Salary placement and seniority is at the discretion of the owner and depends how the staff is brought in. Accounts are not being kept and where done, are manipulated. Different book accounts are prepared for different stakeholders. Flights are cancelled at will without any repercussion, contrary to existing rules. Individuals are made CEO without any prior experience in airline management simply because this is what the owner wants. Members are appointed to the Board without any idea about the aviation industry,” stated Kuru.
In his contribution to the panel discussion on the event theme, Corporate Governance And Airline Industry Development In Nigeria, the Chief Executive Officer of Ropeways Transport Limited, Mr. Dapo Olumide identified right sizing of aircraft, demarketing of airlines, poor infrastructure, poor business plan, poor pricing of tickets, wrong motive for airline establishment and poor on-time performance as reasons for failure of Nigeria’s airlines over the years, adding that it was necessary for all stakeholders to get sincere with each other to enable the industry move forward.
Mr. Albinus Chiedu of www.albinuschiedu.com noted in his input that a general change of orientation and attitude among all stakeholders and citizens was required to achieve good corporate governance in the sector.
Mr. Lawrence Fubara Anga of Aelex advised the NCAA to go beyond the persisting checklist mentality in their regulatory activities and give more attention to economic regulation of the sector.
“If your fundamental economics are wrong, there is no way your processes will be okay,” he advised the airlines.
In his presentation, the Chief Executive Officer of GDL noted that the 15 million passenger volume of Nigeria cannot sustain the number of airlines in operation. He advised the NCAA to adopt the consolidation approach employed in the banking sector as a way of developing a strong airline that can fly the country’s flag and strengthening any airline that comes into the scene.
Organizer of the event, Mr. Simon Tumba had earlier in his welcome speech, said that this third edition of the event was informed by various corporate governance issues, including the extravagant lifestyles of some Nigerian local airline operators at the detriment of their airlines’ survival and public interest.