AMCON blames sole proprietors for airlines’ woes, demise
AMCON, a Federal Government’s special vehicle for debt recovery, said its experience while interfacing with players in the industry had shown that majority of the failed airlines were grossly mismanaged, with the owners allegedly stealing and diverting funds.
It was in this light that the body warned the Federal Government to desist from giving the airlines bailout funds, saying two of such recent N120 billion worth of interventions by the Central Bank of Nigeria and the Bank of Industry to the airlines ended being abused.
AMCON CEO, Ahmed Kuru, who spoke at the 2018 colloquium of the Nigeria Travel Mart (NTM), in Lagos on Tuesday, said a cursory look at the local air travel industry would reveal high mortality rate of airlines in excess of about 160 airlines out of about 200 registered within two decades.
Kuru said, while the failure of businesses is not peculiar to the sector or Nigeria, what is staggering is that the failed airlines all had less than 10 years lifespan, after operating profitably for the first18 months.
He said while a plethora of reasons could be adduced for the attrition, quite dominant is the lack of corporate governance across the board.
“For instance, the Board of Directors are represented by father, mother, son, who have no form of aviation or airline training to qualify to be on the Board. Lifestyle of owners takes precedence over payments to pilots and engineers among others.
“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.
“Again, we have several cases of 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. New 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.
The truth is that decisions to expand fleet and commit millions of dollars are taken by an individual without deep analysis.
“In addition, funds of the company are not separate from that of the owner. Operators are not aware of account management.
There are cases of airlines using the last flight to ferry the entire day’s sales straight to the owner’s house.
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 available, 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.”
Kuru said further that given the ownership structure of most airlines in Nigeria, the Board’s veritable check on management and excesses of airline owners who show very little patience for orderly and planned conduct of business, is practically absent.
He, however, reiterated that the aviation sector remains quite essential to the growth of the economy and deserving of a careful plot to greatness, if Nigeria is to occupy its rightful place in the comity of nations.
“A functional board is necessary for the effective operations of airlines with long term survival and profitability objectives. Aviation must not be for accidental business men.
That is why sole proprietorship should also be discouraged, while the regulators must begin to pay extra attention to the airlines and their corporate governance, otherwise no airline will survive,” Kuru said.
Convener of the colloquium and Publisher of NTM, Simon Tumba, agreed that stakeholders had seen 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 flashes 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.”
Vice President, Pricing & Revenue Management Copa Airline, Panama, Chris Amenechi, said what the airlines and the industry need to survive is patriotic leadership, where the stakeholders all plan their businesses to truly service the needs of Nigerians and not selfish interest.
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