Investors and managers in the airline subsector of aviation industry in Nigeria have repeatedly operated into the same spots in the atmosphere where they got their investments crashed.
It is however unfortunate that none of them, past or present, has come out with sustainable solutions on how to avoid or successfully navigate out of those particular turbulent spots in the industry’s atmosphere.
In this article, Dr. Daniel Young focuses on the underlying challenges of airline industry in Nigeria and attempts to provide investors and managers with possible solutions on how to successfully avoid or navigate out of the turbulent spots in the atmosphere and enjoy good returns for their investments.
Happy reading:
Success leaves patterns, and failure also leaves patterns and these patterns serve as clues and road maps to any desirable outcome; good or bad, depending on the preference of the actor or actors. For most African countries, especially Nigeria, we would rather clamour, whimper, blame government and even curse our fate than probe into the real and perceived causes of our failures. Strangely, inside these stories of failed airlines are clues and patterns of how and why they failed and as long as we are unable to classify the information gleaned from these unfortunate events into declarative or factual knowledge, skills and insights, these clues left us by these signposts to failure will not serve us well in designing new and better outcomes for the industry and the country.
Aviation in Nigeria, is presently labouring under the heavy negative footprints of dead airlines – so difficult to ignore, even as the few surviving domestic airlines are also confronting almost all the challenges that led to the untimely death of these extinct airlines.
The reader may be surprised to notice that, of more than a dozen airlines that have gone underground in recent aviation history in Nigeria, no study exists in the industry on why these airlines went down, apart from reports in news media on the airlines. From the scattered news stories everywhere, we noticed, an emergent pattern in all these failed airlines starting from Nigerian Airways through to the now- almost- extinct MEDVEIW airline. The stories are all the same from; Chanchangi, Bellview, ADC, EAS, Slok, Savanna, Triax, Air MidWest, Sosoliso, Oriental, Dasab, Albarka, Fresh Air, Okada, Space World, Harka and Harco, Skypower Express Airways, Capital Airline, Rite Time Aviation, Selcon Airline and the beat goes on.
It is difficult to ignore the repeated patterns of failure in all stories of dead airlines; these failed ventures hobble between two very lame excuses; air crash and or financial stress which in all sincerity is another way of saying- management incompetence.
DECODING THE DNA OF FAILED DOMESTIC AIRLINES
Fortunately, sequencing of the human genome has furnished us with the unusual benefit of understanding the processes by which living organisms grow and develop and by extension increased our understanding of the basics of decoding any strange event or challenging in the corporate businesses arena using the same models. We now can leverage our understanding of DNA to explain some of the most difficult- to- understand diseases that plague airline business operation in Nigeria.
Just as DNA has helped in advancing medical science by decoding and mapping patterns that lead to precise understanding of diseases; there is also a need to understand and review some patterns bestowed on us by the stories of these failed airlines so that the industry can take. There are clearly no visible signs of maturing understanding of investors coming into the domestic airline business in Nigeria, as we still find a preponderance of those very patterns repeating once again. Let’s review a few of the symptoms of a dying airline and new ways of looking at the problems.
Below are a few of the patterns we noticed in our study:
SYMPTOMS OF A DYING AIRLINE
[A] Airline Schedule Slippage. When an airline begins to cancel and reschedule flights indiscriminately, it is a sure sign that there are internal issues [management or financial] manifesting in obvious service failures. Every business traveller in Nigeria knows that when you have an important appointment to keep, you must not go to Arik airlines. This reputation of schedule slippage has killed many airlines and unfortunately, operators have failed to recognize that airlines die by installments and it begins from failed expectations. An airline that frequently skips flights, cancel and or reschedule flights is on her journey to the grave yard.
1. REVENUE DROP.
A natural consequence of schedule slippage is revenue drop. When an airline begins to disappoint costumers –without reason, costumers begin the search for better alternatives. Our studies show that majority of the domestic airlines that disappeared from the scene suffered from low patronage which drastically affected financial metrics. The moment an airline begins to experience acute shortage of funds then the airline is already in big trouble. Nigerian Airways is a very good case in point. The airline collapsed for a variety of reasons including; poor cash flow management, poor accounting, book keeping, over bloated staff, lack of serviceable equipment and poor record keeping.
It is an open secret, at a time that some of the owners of these defunct airlines were helping themselves directly from ticket sales and when the time for the routine checks came, there was no money for airlines.
Here are a few early warning signal of a dying airline.
[1] Sudden drop in revenue
[2] Increasing costs that are greater than an increase in revenue
[3]Falling behind obligatory as salaries, superannuation payments, tax payments etc
[4] Poor debt collection and recovery mechanism.
[5] Family members’ involvement in business.
[6] Personal expenses becoming mixed up with operating cost.
Most of the airlines that seem to be doing very well in Nigeria are already facing this challenge and ill soon start showing signs of these cracks that will ultimately sink the airline. Many of these airlines have mounting overdrafts and that is why you find bankers sitting next to them at the ticketing counters to ensure that collection by the banks is prompt.
To be continued on Thursday
