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NAHCO most successful privatised company – MD

By BusinessNews Staff on March 31, 2014

The Nigerian Aviation Handling Company (NAHCo) Aviance PLC, is a major player in the ground handling business in Nigeria. Ever since it was privatised in 2005/2006, it has continued to grow progressively. The Managing Director of NAHCo Aviance PLC, Kayode Oluwasegun-Ojo in this interview with journalists said that the company’s turnover has continued to grow, and of all the companies that were privatised by the Bureau of Public Enterprises (BPE), NAHCo is the most successful. He also spoke on other issues such as the challenges NAHCo is encountering at the airports, free trade zone and efforts by the company to ensure that its warehouses are not laced with dangerous devices among other issues. Correspondent, ABEL ARUKPE, was there. Excerpts:

There is a high rate of insecurity in the country, how do you ensure that goods and cargoes that come into your warehouses are not laced with dangerous devices?

When we took a decision to modernise and expand the warehouse, we consulted widely and one of the things that we did was to use a standard set by the International Air Transport Association (IATA). Our warehouse is fixed to IATA standards. Secondly, you will recall that in 2012, we got the prestigious ISEGO Certification and that is being renewed. Those two together mean that they are standards we would follow in operating that warehouse. The first is that we have invested significantly in technology. We were the first in this industry to get a dual-vision scanning machine, it was commissioned two years ago by the former Director-General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren and we have since invested in Explosion Detection Devices (EDD) in Lagos, Abuja and other airports that we have our warehouses that do import and export.

That in a nutshell is what we have to do. I think I should also mention at this point that the international airlines that are our clients especially the European carriers have a mandate, which includes the fact that they don’t take anything bound to Europe except those ports meet certain criteria. What I can tell you is that we still have those clients on our books; they are still working with us, they are still exporting.

Indeed, we had a couple of audits in recent times, and that is because we were able to meet the criteria that they set.

We believe that in Nigeria, we can operate with global best standards even if we have local contents. That is our story in NAHCo. That is how we have been able to deal with the issues around threats or terrorism over the years. Of course, there is no full proof system and we keep improving daily, but as per where standards are today, we are able to meet global standards.

What plans is management making towards expansion and diversification drive of NAHCo Aviance?

Let’s start from the beginning, NAHCo Aviance is going to be 35-years old in April; it is one of the few companies that I know in Nigeria that started operations before it was incorporated. When the Murtala Mohammed Airport (MMA), Lagos commenced operations in April 1979, NAHCo too started. The company was later incorporated in December 6, 1979. That is by way of background.

The privatisation of NAHCo took place in 2005/2006 and the shares were listed on the Stock Exchange. Before we came out to say we want to diversify and expand, one of the things that we have engaged in the first phase quietly was transformation. The second phase, which started in 2010 until the end of 2013 was more of obvious and visible transformation.

By that, I mean in a situation, where before privatisation, the company had 60 per cent government ownership and 40 per cent private ownership, which were the airlines. The 60 per cent being government was dominant. The orientation was government and that orientation had to change. You do not take people who play Division Three in English football to the Premiership and expect them to win. If we didn’t complete transformation, you cannot talk about diversification and expansion. By the way of mention, of all the companies that have been privatised by the Bureau of Public Enterprises (BPE), we dare say that NAHCo is the most successful. Before privatisation and after, we have consistently paid dividends. When we were privatised, the company was about 1,200 staff, but today, we have about 1,700 and the turnover has been growing.

Specifically to your question on diversification, in February, we were given our free-trade-zone approval conveyed to us through the office of the Nigerian Export Promotion Zone (NEPZA), based on Mr. President’s approval. I think for us, that is a significant step forward in terms of diversification and there is a subsidiary company, which has been put in place, which is going to start operating that free-trade-zone.

The last thing I want to say with respect to that is that because we are a publicly quoted company and we operate governance, we always have to disclose what we want to do ahead of time. The expansion and diversification is very much on course.

Can you expatiate more on the free-trade-zone approval that you mentioned?

You will recall I mentioned that we did two steps transformation; internal and external. Part of the external phase of the transformation was the commissioning of the ultra-modern warehouse on May 31, 2012. By the time we commissioned the warehouse, we realised that we needed to do certain things to enhance the capacity that the warehouse has. Specifically, what the free-trade-zone does is in three phases; for the country, for NAHCo and for the aviation industry. It provides an opportunity for you to bring in things as it were in “a borderless environment”.

Secondly, it will improve significantly the traffic that come into Nigeria and enhances the status of Nigeria as an aviation cargo hub and of course, it will bring us more cargo business as you can do trans-shipment and others.

In very simple terms, that is what the free-trade-zone will do for us; the country, company and the industry. The free-trade-zone will be sited at the Murtala Mohammed Airport (MMA), Lagos.

Can you marry the free-trade-zone approval with the planned cargo export terminals proposed by the government?

Part of what we did after the company was privatised was to understand the business. In very simply terms, transport economy in modern economy is as follows: if you charter a car from Lagos to Benin, you will pay the price of to and fro whether you use it only one way. I dare say that what we have had to pay as a country in terms of air prices are factored into this, also, because a plane coming into Nigeria full of passengers and cargo will be combined flight. It is full of cargoes because of a lot of import, but they leave basically empty because there are no lots of exports. However, you can be sure that whosoever charters that flight, you will pay for the fuel to and fro.

If we compare ourselves to a country like Ghana, where they do a lot of outbound exports, as we heard on a good authority, I don’t know if it true that lots of those exports are actually sourced here and then exported out.

So, this free-trade-zone will also give us the opportunity to have a lot of that outwards.

As I said, right from Nigeria and then, trans-shipment within Africa as a whole.

Can you give a figure as to how much Nigeria losses to absence of exportation annually?

I cannot give a raw figure right now, but let’s use this as an example. A plane comes in and has X number of pallets of imports and it is leaving empty. If you multiply what you bring in just by one as a potential of what you can take out, that gives you an idea of what we could be making. A lot of these things are happening.

We have an export shed there and the cargoes are in volumes, but not in the class of what is potentially available. To link it directly with what has been proposed by the Ministry of Aviation, in conjunction with the Ministry of Agriculture, the figures they are quoting is huge; billions if not trillions of naira of potential agricultural produce that could be leaving Nigeria if we had the appropriate structures in place.

With the present equipment and manpower at your disposal now, can you conveniently say the company is able to satisfy the needs of its clients and block hitches in its operations?

Let’s flashback to 2008, which was about two years after our privatisation, the average age of those equipment then were between 20 to 30 years old, but today, the average age of our equipment is between two to three years old. We have also taken time to train and re-orientate our staff and in the last two years, several members of our staff have won integrity awards, airlines awards and others. Those are clear testimony to the fact that we are well positioned to serve the current clientele that we have.

We will strive to keep improving because the industry in itself is not static. Let me also say that the aviation industry is one of the youngest industries in the world, probably after the Information Technology (IT) because we first flew in the turn of the 20th century by the Wright Brothers. The industry is about 100 years old. KLM Airways is the oldest commercial airline and it is about 100 years old, you cannot compare that to industries such as the media, alcohol, brewery, beverages and co. Those industries are multiple hundred years old. It is a relatively new industry if you look at industry comparisons all over the world, but we are positioned to make sure that we keep abreast of wherever industry is going into. Indeed, I will make bold to say that as Nigeria and West Africa is concerned, we remain a leader.

How has the influx of foreign airlines especially since 2008 until now boosted your business in the industry and your projection for the future?

We are in the secondary end of the valued chain. The primary decision to fly an airline is taken by passengers and the primary decision to consign goods is taken by a consignee. We do business with the airlines, we are the business providers and not at the retail end. However, out of the over 30 foreign airlines that come in, we handle 85 per cent of them including their cargoes. You are right that since 2008, a lot of airlines have come in and I would say the same ratio we have been able to maintain in terms of keeping ourselves in that top end, 85 per cent of international airlines we still handle.

On the outbound passengers, we will still benefit because we are at the secondary end of the market. As far as we still remain a prosperous country of 170 million people who will have the means to fly for leisure, business and education, we are still on ground as it were to deal with the request of the airlines to be carrying those passengers.

In fact, we will say that our joy will be to see a lot more of local participation without compromise for international standards. Our pride in NAHCo is that we are a Nigerian company; we have been working with foreign airlines for 35 years, delivering services in a local context, but with international standards.

What are the major challenges confronting your business at the airports?

This is not a NAHCo problem alone, but it is a significant problem for the Nigerian private sector as a whole. The situation has affected us quite a bit. We run several generators in different locations and we provide a little bit of certain infrastructure even around the airports in terms of Closed Circuits Television (CCTVs) and a lot of other things. At the end of the day, because the primary issue in this industry revolves around safety and security, we are unable to say we will not do those things because if we don’t do those things, we might not be in business.

If you look at our results may be in 2011 and 2012, if you look at profit and loss, you will see that we have been spending lots of money to maintain those things. It is part of the cost of doing business, but we sincerely hope and pray that with the privatisation of power, other reforms that are being taken on by the Federal Government that we will see the impact of those things on our own cost profile and we can become more profitable and give our shareholders more dividends.

What is your reaction to the plan by the Federal Government to privatise the country’s aviation industry?

We said earlier that the benefits of privatisation are what we are seeing. Obviously, I will have a positive bias towards that. The belief is that privatisation removes sentiments, moves capital to private hands, return is what is looked for and return is given especially when you are talking about this modern day capitalism, services must be delivered. We believe that with privatisation, things would be better. That is the honest belief and there are many examples outside of Nigeria. Lufthansa used to have government shareholding, but today, it has been significantly reduced and it is doing very well. Same thing applies to British Airways. Gatwick Airport in London is managed by a Nigerian and it’s doing well. We would want that to happen and we believe it will make us more efficient.

[Daily Independent]

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