NAHCO: Threading the Rough Path to Success

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By Kunle Aderinokun

The story of Nigerian Aviation Handling Company Plc (NAHCO) has been described as that of hard work and resilience, little wonder all the performance indices are looking up. For a company that ranked the best among the Federal Government privatised companies, stakeholders and analysts believe, there is something it must be doing right.

The rating agencies, in their assessment of companies, know what they are looking for and as such, they don’t just assign points. That was when in 2015 Agusto & Co, did its due diligence on the leading aviation handling company, it found NAHCO worthy to be rated Bond 1 – A+, Bond 2 – A+; CGR – A- .

Evidently, in the company’s financial results as at full year ended December 31, 2015, it posted improved revenue of N8.5billion, representing about 5 per cent increase over the figure for the same period in 2014. It was on the basis of this result that the board proposed a dividend of N324.8million to shareholders.

Generally seen by several analysts as a very difficult year, the FY 2015 results of NAHCO, was in itself, a testimony of a kind as regards the resilience of the company especially in an election year where even big corporates failed.

As at June 2014, the company realised its number of staff was very high, compared to the productivity and the board whose duty it was to provide strategic direction believed something should be done to save the future of the company.

Realising the consequence of restructuring, the company approached it in a very strategic and businesslike fashion. Because it desired minimum disruption to operations as it carries out the restructuring programme, the company’s top management had a consultative meeting with union representatives when it sought to keep them abreast of its proposed far- reaching move.

The idea behind the restructuring was to make NAHCO a more efficient and profitable organization.

The specific objectives of the first phase of the programme were to: reduce the cost of payroll, and change organisational structure from top heavy to bottom heavy. This should naturally lead to reduction in cost of payroll.

The success of this phase of the restructuring exercise was attested to by the high savings made in the running cost of the company. The company posted gross annual savings in the region of N141.5 million. It also achieved a leaner and firmer structure, which is opposite to what it used to be.

Before the restructuring, full managers in the company were 36. However, after the restructuring, the number was reduced to 15. Despite this reduction, sources within the company, told THISDAY that the job had not suffered. “What this means in practical terms is that there is now better and efficient staff utilization in the company as opposed to what it was prior-restructuring,” the source revealed to THISDAY.

GSE Management

Another area that got a touch of restructuring is equipment. Generally referred to as Ground Support Equipment (GSE), this is the support equipment the company uses in servicing airlines at the 10 airports where it operates in Nigeria. THISDAY gathered that the replacement of the GSEs had actually been done piecemeal in the period preceding 2011. Thereafter, it was hastened as many of the inherited GSEs from old NAHCO breaks down every now and then thereby affecting service delivery. From June 2012, however, with a new board in place, there was a greater urgency to replace the equipment.

The new strategy paid off when NAHCO became the ground handlers to which other handlers rushed for help. The sheer size and modernity of the fleet received several commendations from the Nigeria Civil Aviation Authority (NCAA) and international airline inspectors.

The acquisition of the GSEs also deepened the existing MoUs between NAHCO and several European and American Original Equipment Manufacturers (OEMs) and vendors who became attached to NAHCO on the basis of huge investment in equipment and training of the company’s staff.

In the course of training by staff, some form of knowledge transfer took place which caused the technicians to be able to add a lot more local content into the fabrication and repairs of GSEs. This is another cost – saving measure which the company greatly benefited from.

Board/ Management Strategies

Realising the increasing challenges facing the Nigerian economy and the need to manage costs, THISDAY learnt that the board in 2016 shifted all its strategies sessions to Nigeria. The use of foreign locations for such sessions was suspended so as to preserve company’s funds.

To further ensure cost containment, some board meetings were held through circulation. This eliminated the need to come together at added cost for deliberations.

With all these measures put in place, board expenses reduced by 40 percent in 2015. A further reduction is expected by the end of the current financial year.

Enugu Warehouse

As part of its business development drive, NAHCO took the challenge of driving cargo development in the South-east where it commissioned two warehouses at the Akanu Ibiam International Airport. The objective of this, according to sources, was to increase cargo penetration in the South-east, increase cargo volumes and make Enugu the gateway in terms of cargo into the eastern hinterland. The commissioning of the warehouse at the airport, the only one of its kind in the entire South-east, had forced the authorities of the Nigerian Customs Service to realign its resources and retool for higher business volumes at the airport.

Diversification

The diversification initiative of NAHCO had been on the agenda long before now. That explained why the NAHCO Free Trade Zone (NFZ) was established and a lot of progress had been made in this regard. NFZ, which has secured its operating licence from the Federal Government in 2014, already has its take-off head office in place at the Murtala Mohammed International Airport, Lagos. Besides, memorandum of understanding (MoU) with technical partners has been signed and the company is ready for full placement/initial public offer (IPO).

Also, as part of its diversification strategy and positioning of NAHCO as a one-stop – cargo handling and logistics company, the Mainland Cargo Options (MCO) was established. With a licence from Nigerian Customs Service (NCS) as clearing and forwarding service provider and General Service Agents (GSA), the addition of MCO into the NAHCO Family means that the Company could now take charge of an importer’s cargo right from the aircraft to his very home/warehouse.

MCO which became operational late 2014, broke even in its first full year of operations

Besides, the NAHCO Agrizone project is also on course. The company already had a formative MoU with Dube Trade Port of South Africa to serve as technical partner.

Conclusion

At the 35th AGM of NAHCO which held in Abuja on July 26 this year, shareholders took turn to commend the effort of board and management in repositioning the company for growth. It is therefore clear to observers why there was such a resounding vote of confidence on the board and management.