'OBSOLETE AIRPORT INFRASTRUCTURE HAMPERING GROUND HANDLING BUSINESS'
When Isaac Orolugbagbe assumed office as the Managing Director/Chief Executive of Skyway Aviation Company Limited (SAHCOL) in May 2010, he knew he had an enormous challenge of re-strategizing and re-invigorating the place in order to bring good returns to the investors and workers alike.
Fortunately for him, he is from a private sector background where output is a direct reflection on one's input in the system. With smoking hot ideas and approaches, he set out to pilot the affairs of SAHCOL, whose privatization process was wrapped up few months prior to his appointment.
On landing at the company, he soon discovered a sizeable number of the workers still had the mentality of federal civil servants, who saw the old SAHCOL as the government's national cake they could freely eat, even without contributing to the baking.
Expectedly, he began changing their orientation via training and extensive interaction.
He says the staff now know…and are awake to their duties, as such days where duties fell in the gap are over.
In an interaction with journalists recently, he spoke about his new job, plans for moving to the next level and more.
Isaac Orolugbagbe, FCA, has been chief executive officer of Skyway Aviation Handling Company Ltd. since May 2010. Orolugbagbe served as chief operating officer of Skyway Aviation Handling Company Ltd. from February 1, 2010 to May 2010. He served as managing director of Red Star Express for 10 years before retiring in 2007. Orolugbagbe's career commenced in 1985 as an Audit Trainee in Olatunde Ayoola & Company, Lagos. He joined Bola Sadipe & Company in 1987 and served as its Audit senior consultant.
He later joined DHL in 1991 as the treasury controller, from where he moved to Red Star Express in 1994 first as Audit manager and, later, rose to the position of assistant general manager, Finance, in 1996. Mr Orolugbagbe serves as a non-executive director of Red Star Express Ltd. He served as director, Red Star Communications Limited; Thomas Wyatt Nigeria; Western Cape Wines Limited; Thomas Wyatt Nig. Plc. and Beta Computers Limited. Orolugbagbe is a public speaker on Business leadership, leading sessions on Business Strategy on a part-time basis at the Lagos Business School of Pan African University.
He has published reports on Courier, Express and Postal Industry in Nigeria, and the effectiveness of Audit committees in Nigerian banks. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN); Fellow of Institute of Directors (IoD); Chartered Institute of Marketing, Alumnus, Lagos Business School, and Witts Business School, South Africa. Orolugbagbe holds a BSc from the University of Ife (now OAU) and a Masters in Business Leadership (MBL) from University of South Africa.
We've invested massively in new equipment. The baggage cab, we just brought in about 50 from Turkey; the container dolleys, we just cleared them last week. Right now, we have capacities to meet a lot of needs and as I am talking to you now, we are expecting about three extra push backs. These equipment are costing us not less than a thousand Euros and I want you to know that all these things are on the way and right now they are on the sea.
Using touts as ad-hoc staff
What I will say is that we do have congestion sometimes but the use of Area Boys or no Area Boys is out of it for us, because we have our own loaders so you don't need to bring Area Boys when you can use loaders that have been screened and have gone through security checks. It is the process of palletization and depalletization that you have need for labour but if your goods come in the way ICAO specified in terms of standard, then you're in line. When your consignments come, they come with wooden pallets, the forklift can always carry them from one place to the other. So, we don't have problems with standard cargoes.
The cargoes that we are considering now are cargoes that are packed with nylon bags where they are limitations as to the number of people that can carry those of them that are not available to automation. All the ones that come in standard type like the regular carriers like the BA, Arik, and others come in their wooden pallets and we don't have the issues with anything concerning that.
Renewed security threats in aviation
You know in the security issue in terms of the stolen DDC machines, I must say that it has nothing to do with the handlers. The security system that we have then, we still have them now, I mean we have an army of security people in SAHCOL. We are also using external security companies and we also have internal security staff so our security is quite in order. I just told you that we have acquired CCTV Cameras to make sure that we cover all the areas of operations 24 hours. These are things that were not there last year.
Experience since assumption of service
It's a very simple business. We've customers that need good quality service. And we have staff who're looking for employment and those who await there aspirations to be fulfilled. And we also have investors who are also looking for returns. Where am coming from, the same parameters are present. The only thing I can tell you is different is structure.
We're coming from a bureaucracy where people are used to saying am directed to do this or that. Am not used to that. I don't like people sending memos to me and say oga for your approval. I'll fight you. When you're sitting on a table and sending memo to me, you should have read it thoroughly, studied it and checked all the options and then you say, please I recommend option two for your approval. That's the only man that gets my approval. Someone that does otherwise, will not last in the company. What I ask my experts to do is to discharge their duties and demonstrate they're experts. My job will just be to support my staff.
Challenges and how the government can help
The airport (MMIA) is there and you can see it's old. It's about 30 years old. No, extension like phase one, phase two or phase three. When are we going to have extra wings, extra comfort for our airports? These things are long overdue. Someone needs to sit down and announce to us, in a matter of months, when we're going to have expanded terminals?
The place is crowded and it's doing more than the capacity it was built for. Most of issues we're raising today is because of shortage of capacity. When that place was built, it was meant to handle about 10 percent of the capacity it is handling today. How do you renovate a conveyor belt carrying 10 tonnes when it was built to carry one tonne? It will always breakdown. It needs expansion and we're paying charges and taxes for these things. It's time for someone to sit down and say whatever is happening in New York must obtain now. In terms of human capacity, we have the people to drive this.
There's no field of human endeavour that Nigerians are not excelling all over the world. And airport business is no exception. Nigerians are running airports in New York, South Africa and so on. Why can't we run our own airports? Let them identify these brilliant people, create space for them to turn the industry and the country around. The airport is too small for this country.
Success stories in SAHCOL
There are a few tangible things you would have seen in terms of equipment. I think so far we have spent over N3 billion to acquire new equipment. Most of the time, we borrow money from banks to finance the purchase of new equipment. We have also completed the warehouse which is adjacent the old one, it is 5000 square meters. We have also acquired a software for the company. So whether you are in procurement, purchasing, you are in Human Resources, you are finance, there is one software that everybody uses to run the company now. If you have a requisition for biro, you go to your computer, you put in your requisition.
There is a manager that will authorize, as soon as he authorizes, the system passes it to somebody, checks are made and if you don't attend to it on time and you are the authorizer, the e-mail will trigger and it will escalate to your superior that you haven't done your job. In that way, the entire company is integrated in a seamless manner. We have also signed a contract with Lufthansa subsidiary for cargo and warehouse management software, they call it cargo soft. It is one of the most popular software for managing cargo business in aviation. I am sure within the next two or three months, the team will come and install it because we have paid and we are waiting for implementation.
That is as far as software is concerned. We have communication between the warehouse and the office at the airport and our head office at Apapa, so all the computers can talk to each other. So, there is communication system in place. Also on IT, we have installed a CCTV system that records the entire cargo operation both inside the warehouse, outside the warehouse even from some section of the tarmac. So, when you are bringing things in, we have about 50 cameras there that is operating 24 hours and it also an internet base CCTV system. From my telephone, I can check any of the cameras and then we are recording on the 24 hours basis. Those are some of the things that we have done.
On training, staff are getting trained and as I'm talking to you now, we have concluded construction of our training school. Before we were training people from a small cabin, now we have a training school that is almost 20 times where we left such that all employees can be trained there. But the target is every single staff of SAHCOL, all the 1,300 will benefit from the training. As we are talking right now, training is going on.
We have also started implementation of the International Air Transport Association (IATA) Safety Audit for Ground Operations (ISAGO). It is International Standard for Grand Handling Operators and operated by IATA. We have started, we have signed, we have established links with IATA and the IATA instructors are right here with us and our first batch of auditors are under going training. We are going to breed about 40 sets of quality auditors and you will begin to see the effect of these things in the another 12 months. We are not using consultants, we are using our own people to drive the process. The training school is a very huge place, there is a library facility there, we have conference rooms and all that.
We have the largest airline in the world now, they are now partnering with us. United is a very happy customer of SAHCOL. And gradually every great company will also knock on our door and come to participate in enjoying great service. Our customers are extremely delighted and we are receiving letters of commendation from the people we are serving and they are also expanding the scope of the services that we give them. Some of these people, we were only handling them in about one, two stations, they have now given us their entire businesses that they have and we are talking to additional airlines who have also indicated interest. What is disturbing us is capacity but what we are actually getting now is that the SAHCOL that you used to know is different from the SAHCOL that you will begin to experience.
That is as far as what we have achieved. And a lot of our creditors we have managed to reduced the size of debts that we met. I remember when I came we had so many people coming to the office and queue upon queue. I met about 200 groups, we have cleared all of them and we are taking each segment and clearing them. We want to be as honourable as we can so that we don't disturb anybody. Anybody that does business with us should be a very happy man. I am looking at every single airline as potential new customers. The airlines are not many but we are hoping and praying and requesting all of them to come and ride with us.
Credit and debit
We are owing a lot, we are still owing. It is an ongoing concern. By the grace of God, we will continue to owe. The bigger our business, the more money we will owe. And people are owing us too and our debt is growing and my job is to manage the balance sheet. I manage the creditors, I manage debtors. I grow my business by extending credit to new customers and I use the money from my creditors to extend those credit to the customers.
What is important is that; are we keeping the balance sheet current? And what we are doing is to make sure that we are keeping the balance sheet very, very current. Our debt is growing so is our liability growing. Don't worry about the size what you should worry is the currency of the balance sheet. So, those of us in this kind of trade that I am in, you have to focus on the key issue.
Some people have debtors of N50 million because their turnover is only N100 million. Some of us are doing N1billion and we have debtors of N500 million. Who has the current debt? What is important is the average age of the debt not the absolute size. When people are owing you for 30 days that is a very good debt. But when people are owing you for 50 months, 50 years, the chances of recovery is extremely low. But if it is big and it is current, then you are doing good business. So it is our prayer that it should be big and it will be very current.
Airlines' complaint on high charges
We had representatives at the recent stakeholders meeting on the issue of charges in the aviation sector. One thing have to understand is that customers are changing and they are getting more sophisticated. Their wants are increasing and everybody is facing pressures from different fronts. When the airlines say arbitrary charges, definitely that does not apply to ground handlers. The tariff that the ground handlers are operating today was approved more than 10 years ago. It has not gone up, it is only going down. So if anybody talks about arbitrary charges it must be from some other regulators or operators.
I have not heard that there has been an increment in the tariff or the rate that the ground handlers are charging. Be that as it may be, we still expect customers to ask for more. Diesel price that we bought last year is not the same as the price this year. And all our equipment are operated with diesel. The exchange rate of naira to dollar that we are paying today is not what we paid three or fours years ago. People are asking us to buy new equipment at a higher exchange rate and they want to pay for those services at a lower rate.
Those are the issues that are coming up at the stakeholders meeting. It for us to educate, try as much as you can to give improved services so that what people are paying for they are getting value for it. Business is essentially a matter of exchange of values. The issue of complaining of arbitrary charges or no arbitrary charge is an issue of expectation of values. Where is the value that the airlines want? The customers want? The ground handlers want? The airport wants? Everybody is scrambling to take as much as it can take in. And that issue of complaining about charges has been there before I was born, would be during my time, would continue long after I have gone.
Well, it is my prayer and sincere wish that this industry continues to grow so that we can have more of our brothers and sisters in employment; so that competition can push prices down. If it doesn't push prices down, it will push service standards up. That is why I love competition. The growth of domestic aviation has a direct link with the economic well being of Nigeria. It is Nigerians that fly aeroplanes. When the demand is high the supply will respond to the demand. What we are having right now is a lot of structural issues. Quite a number of the airlines have limited capital and aviation business is a serious capital intensive business.
Accessing funds for the aviation business via banks
The Nigerian banking environment is significantly constrained as far as credit in aviation industry is concerned; considering the size of money they are able to give; considering the expertise within the bank. The point is, can they really appraise an aviation business whether it is good or not good? Or whether the bank could lend money to it or not? In those days when I was growing up, when you go to a typical bank they have desks; you have agric desk, manufacturing desk etc.
How many Nigerian banks have aviation desk that can sincerely look at a study or an application for a facility by an airline and claim that they understand what they have written? Those are issues that are constraining domestic aviation industry.
If you go abroad and look at any of the companies that is producing the aviation equipment, Boeing, and all others just name it; all of them simultaneously set up finance companies. They don't expect anybody to put hand in the pocket and come and buy aeroplane. They encourage you, bring 10 per cent of the money we will lease the equipment to you and then you pay gradually as you are operating the equipment.
What we need is a replication of that. We need systems that people can bank on. We need companies that whether the MD or the Chairman is around or not, the system runs. Aviation business is a very serious and disciplined business. It requires capital, it requires process and procedures and it requires management.
The other element which is present and seriously inherent in aviation business is the issue of security and regulatory control. Anytime a security breach happens in the industry, the controls are increased and therefore the cost of doing the business automatically goes up.
All of us need to understand that aviation is not just a business, it is the major infrastructure that any society needs. In those days federal government was at the commanding height of the economy, they do understand that government will provide airport, runways and all that but over the years, we have also seen how efficient government can be in running such enterprises.
What we have to do is to see how we can encourage private capital and private management to come and do this business, in which case some of the problems and risks and disadvantages that are being faced by the federal government's businesses are minimized with private enterprise. So, the question now is; how is the federal government responding in mitigating the additional cost of the controls? How are they responding in helping these airlines to cushion the impact of various regulatory controls and approvals that have been imposed on a daily basis on a global scope? We were all here during the 9/11 terrorist attack on the United States, and the aviation industry in the United States literally was shut down. Apart from South West Airline there is no airline in the US that did not go bankrupt.
What the government did was to look at the number of flights and the capacity of each airline and grants were immediately given. They were given first so that they can go back to business. The point there is that it is a major infrastructure that the nation needs which cannot just be seen and interpreted from private enterprise point of view. Where government has been told to restrain, of course government should underwrite its own cost of implementing the additional control. That to me is one of the issues that is affecting the local carriers. So, we have to look at it holistically and where we need to support them we support them and support them in relation to their volume, in relation to their capacity.
I think there has been an announcement about intervention fund, that announcement has been on for about two years. But how much of that money has anybody been able to access? So, we need to sit down and get some of those who understand this event and also to go into government and partner with government in announcing policy that would assist the industry. This is by way of background.
A few months ago, there was a new investor in the industry, that is Mr. Jimoh Ibrahim who invested in Air Nigeria. If you look at air Nigeria six months ago and you look at Air Nigeria today, the number of flights that they have have increased. In fact the competition that they generated has affected so many other operators that the quality of service is rising.