AM EDITORIAL: What Good Corporate Governance, Risk Sharing Can Do For Private Airline Business
A globally inclined business like that of an airline does not only succeed on the wings of managerial expertise support but on shared survival risk, rather than a monopolized risk, especially with the current state of the global economy.
History has shown that the success and growth of a privately owned airline is not a market accident but a deliberate design drawn from compliance with established principles and standards. For instance, the consciousness of business institutionalization by the airline owner as part of the vision and business plan influences and drives the airline’s activities and operations beyond one man’s decisions.
When a private airline originates from an environment that is highly economically challenged and that airline lacks good corporate governance, securing financial investors’ patronage becomes a struggle.
A financial institution that wishes to be part of a conceived private airline’s success history would want to see in place, a board of directors that functions as such, rather than a bunch of people assembled to play a yes man role to the owner.
Financial institutions look to see controls that help manage foreign exchange risks. They want to see an airline that separates management from operations practically and possibly proceeds on a journey to equity divestment to minimize capital risks. In fact, designing a proper growth structure for an airline is as important as inhaling and exhaling oxygen and carbon dioxide.
In Nigeria, the fact that financial institutions are offering loans to commercial airlines at crazy rates of over 30% is not as challenging as the absence of good corporate governance structures in some private airlines.
The unprecedented volume of support provided to private airlines in Nigeria under the current dispensation by the federal government through the efforts of Minister of Aviation & Aerospace Development, Festus Keyamo (SAN), needs to be consolidated with good corporate governance practices in the airlines.
Decisions about the state of the domestic and even foreign markets with exorbitant fuel and other costs, internal audits and responses to them, transparent business moves inspired by balance sheet, and other critical professional decisions, ought to be taken by an independent board of responsible directors.
Of great concern to stakeholders is the fact that the one-family market structure of the airline sector in this clime, leaves the entire sector with disruptions each time one airline gets it wrong on business plan and administrative processes, which most times reflect in problematic operational results.
Sometimes, a financially troubled airline may not necessarily need a loan or financial assistance but an internal restructuring of its management and processes that do not comply with basic requirements for an airline’s success. Every airline needs the appropriate business management structure and culture to succeed irrespective of model.
Apart from a good regulatory operating environment, a private airline can attract unsolicited and eventually sustained investor confidence to actualize success when it is being run under a good corporate governance, featuring transparent audits and openness to shared risk.AM
