Nigerian Airlines and Corporate Governance

Chinedu Eze

There is a general belief that one of the reasons why airlines fail in Nigeria is because they lack corporate governance in their management.

Industry experts have posited that owner-manager syndrome has contributed to the demise of many Nigerian airlines whose lifespan is average of 10 years.

But some airline owners have told THISDAY that it is easier said than done to insist that an investor who is putting his money in airline business must incorporate other people into his business.

“They call themselves aviation experts and they said we don’t have corporate governance. In this company, decisions are made by the management, not me and whatever that is agreed on, I abide by.

“I don’t know how many of those so-called experts will invest humongous amount of money in airline business and allow others to run it in the name of corporate governance. In this country how many people have your goodwill at heart?” an operator once told THISDAY.

A former director of one of the airlines that is now under threat of extinction also told THIDSAY that the owner took unilateral decisions that were sometimes not good for the airline, “but we allow him for sometime; when he travels and we are in charge, we reverse it. That is the way we have sustained this airline so far.”

Also former Managing Director of Virgin Nigeria and currently the CEO of Ropeways, Captain Dapo Olumide, told THISDAY that one of the reasons why airlines in Nigeria fail is lack of corporate governance.

He said an airline should have the kind of people in the board that would question decisions taken that are not good for the sustenance of that company.

He regretted that many Nigerian airlines do not have corporate governance and that explained why some of them went under.

“The only airlines that ever had proper corporate governance, policies and procedures were Nigeria Airways Limited (NAL) and Virgin Nigeria Airways.

“Every airline in Nigeria is family owned and it is the family members who are on the board; therefore, you don’t even need the requirements of the policies and the corporate governance, which is for an independent non-executive director, for example.

“How can you be independent if your family member, if you are my brother-in-law and you married my sister, and I put you on the board and, I as the chairman say that we are going to bring in Boeing 747 to fly Lagos-Owerri every day, are you going to say no? You may not because we are related.

“But if you have an independent person or I brought you on the board I don’t know you before and I brought you on for a two-years period as an independent director and I say I want to bring in a Boeing 747, you will question it. That is what we call corporate governance and until we get to that stage, we are going nowhere,” he said.
He noted that when he spoke to some airline owners they would say that a board is a board.

“Well, if that is the case; that a board is a board, then why don’t we have the success? So corporate governance is a key element to consider,” he added.

Recently industry experts at a workshop in Lagos attributed the inability of most Nigerian airlines to stay in business for a very long period of time to lack of corporate governance.

The Director General/CEO, Institute of Directors Nigeria, Victor Banjo, identified a link between poor corporate governance and high incidence of fraud and corruption, which he said were the bane of airline operation in Nigeria.
Banjo pointed out that the recurrence of high incidence of fraud and corruption has been linked to poor enforcement culture.

He said that corporate governance provides the controls and discipline operators need and that adoption of corporate governance practices promote effective leadership and corporate sustainability, which provide controls and discipline and could moderate the desire for excessive profit which leads to unethical practices and fraudulent acts.

“Good corporate governance thrives when you have a rationalized policy determination process. This is only achievable when we have clear-sighted political leaders who are committed to the development of Nigeria as opposed to sectional and parochial interests. Ethiopia, Namibia, Rwanda, Cote D’Ivoire, Togo, Ghana and Senegal are getting it right in terms of airline management and airport infrastructure. What is stopping us?”

He added that in other places, airlines struggle but not within a life span of five to eight years as recorded in Nigeria, stressing that corporate governance is very important to the management of airlines.

But to many industry observers, including the operators, the key factors that lead to the demise of airlines include government policies, high cost of operations and high and sometimes arbitrary charges by government agencies. Corporate governance, they insist, is insignificant compared to the other factors.