Nigerian airlines fail due to poor Corporate Governance principles, Kuru, AMCON MD
Photo Caption
L – R Capt. Dapo Olumide, CEO, Ropeways Transport Ltd; Lawrence Fubara Anga, Partner, Aelex; Simon Tumba, CEO/Publisher, NTM; Chris Amenechi, VP, Pricing and Revenue Management, COPA Airlines, Panama; Kolawole Ayeye, CEO, GDL at the 2018 NigeriaTravelsMart (NTM) Colloquium, Lagos.
The managing director of Asset Management Corporation of Nigeria (AMCON) Mr. Ahmed Lawan Kuru has observed that the cardinal point behind the failure of a good number of Nigerian airlines is because they were established without deep-rooted corporate governance principles that can make the companies last and prosper.
Speaking at the 2018 Nigerian Travel Market 3rd Colloquium at the Eko Hotel and Suites in Lagos on Tuesday October 9, with the theme: “Corporate Governance and Airline Industry Development in Nigeria”, Kuru observed that the Aviation Industry operates on a low profit margin which requires prudence that can only come with good corporate governance.
Kuru stressed that for any change to be effected in the corporate governance of the Airline, it must be regulatory-driven as self-regulation has not worked so far.
He observed that the cash flow for setting up of airlines must be professionally scrutinized to make business sense.
He listed some of the areas that require immediate attention to include: Provision of affordable sources of funding and access to foreign exchange, scrutinising the ownership and source of funding of the prospective Investors to confirm fitness, vet and check all the prospective owners of the company, conducting routine and deep examination of the operations and books of the Airline to ensure compliance to set standards, need for existing standards to be enforced and airlines penalised for non-compliance.
Others include: Appointment of Independent Directors with requisite experience on the Board of all Airlines, discouraging sole-proprietorship in the public interest.
He added that just like in banking, ownership should be diversified including adoption of the code of corporate governance for the Aviation Industry.
AMCON boss He identified two major problems with the Airlines in Nigeria; one being lack of an effective Board of Directors, thereby affecting internal policies and discipline, while the other problem has to do with regulation.
He stated that no matter the capital thrown at the sector, if Corporate Governance is not strengthened in the running of airlines, they will still fail, it is a matter of time.
In his welcome address, the publisher of nigeriatravelmart.com and the organiser of the Colloquium, Mr. Simon Tumba noted that the choice of the topic is pertinent, having personally watched developments in the sector for 29 years.
He observed that corporate governance in most private enterprise in Nigeria is weak, but that of airlines industry in Nigeria is worse.
Tumba noted that it is a major contributory factor to the dwindling fortunes of the industry or its stunted growth, or lack of it.
“We have observed how some strong airlines have almost vanished due to lack of financial discipline. How do you describe a director of an airline, who will take $10,000 for a weekend spree? Or give a Japanese publication a $20,000 advert because the advert executive flash her laps before the director? Or how some aircraft were purchased at unbelievably exorbitant rates. I can go on and on.
“We at NTM strongly believe that we have the potential to have a very vibrant airline industry. All we need amongst others is to be consistent in our policies, be more innovative and creative, with strong regards to corporate governance,” Tumba said.
He said the government should give more priority to the issue of airport concession.
Tumba stressed that: “This will give Nigeria an edge and hopefully catapult us to the needed growth in this sector. It is very important that this is executed in a transparent manner with full support of the workers”.
In his presentation also, the vice president, pricing an revenue management Copa Airlines, Panama, Mr. Chris Amenechi stressed the need for the airlines to hire the right executive management teams, best executives to remain in business.
Amenechi said Nigeria do no need any national carrier, but flag carriers because flag carriers are what the country needs.
He noted that the number of Nigerians who fly are small.
Amenechi said the industry needs investors, investment in airport infrastructure by the government, fuel fuel strategy and others.
He noted that the Nigerian Civil Aviation Authority, NCAA, is more of a technical regulator that an economic regulator.
Amenechi outlined the go forward of 1-5 year plan for airlines to include: growth strategy, aircraft, IT, airport strategy, organised Labour strategy, Regulatory strategy and Product and community strategy.
In his remarks, the former managing director of Virgin Nigeria, Mr Dapo Olumide noted that there is high level of rivalry among the domestic airlines.
Olumide stressed the need for right size aircraft for the airlines to remain profitable, need for more finance options, need for airport infrastructure, runway lightings, ILS and VOR and others.
In his contribution, the founding partner of AELEX and the head of the firm’s aviation, Mr. Lawrence Fubara Anga called for a state of emergency in the aviation industry in Nigeria.
He said there is need for a stakeholders meeting for the private sector players in the aviation industry to fashion a way forward for the industry.
He supported the need for corporate governance in the aviation industry.
Fubara said though the NCAA has economic regulations, but it is not adhered to.
Lending his voice to the debate, a former executive director of AMCON, Mr Kolawole Ayeye stressed the need for consolidation in the aviation industry.
He said for the Nigerian aviation industry to move forward, consolidation is key.
The former AMCON executive director observed that if after so many years the aviation industry cannot boast of two or three strong carriers, something must be fundamentally wrong with the industry.
Ayeye said corporate governance should not only be for the airlines, but also at all government levels.
He said it is abnormal for the regulator to be fat while the airlines they are feeding from are lean.
Maida expressed excitement at Nigeria’s success at World Radio Communications Conference 2023
Maida expressed excitement at Nigeria’s success at World Radio Communications Conference 2023
Maida expressed excitement at Nigeria’s success at World Radio Communications Conference 2023
Maida expressed excitement at Nigeria’s success at World Radio Communications Conference 2023