SAHCOL: A case study in turnaround

Skyway Aviation Handling Company Limited (SAHCOL), one of the two handling companies in the country, has become a poster-company in the aviation sector and in the nation at large. Chris Aligbe, an aviation consultant, writes that this has been made possible due to the incredible turnaround result the company has posted within the usual prescribed five-year period for classic turnarounds for not-quite-so-virile and ailing businesses.

In the beginning

The indubitable record is that at the onset of life as a privatized company, SAHCOL showed afflictions typified by patients for classic turnaround. Every component of the company was dysfunctional and was no longer contributing much to its survival, let alone profitability and growth. Eight critical areas constituted, as it were, the 500-pound gorilla whose weight impaired performance. These included roadmap, vision and mission; organizational structure; manpower; capitalization; equipment; corporate governance; work culture; and working environment.

At the time of privatization, SAHCOL had no roadmap, no vision and no mission. It was just carrying on without focus. There was neither a development plan nor projected growth. Again, the organizational structure of SAHCOL under Nigeria Airways was aligned to the structure of the airline and did not conduce to that of a modern handling company. Worse still, in spite of the fact that an operational autonomy had been granted SAHCOL in October 1999 and a general manager, Oluropo Owolabi, had been appointed to drive it. Owolabi’s erstwhile bosses under whom he worked as the airline’s country/marketing manager for the Americas insisted on not only supervising him, but also on directing the focus of the handling company.

This inordinate desire, though vehemently resisted by Owolabi, nevertheless engendered divided loyalty and antagonism among the staff. And since the staff were all still Nigeria Airways staff, Owolabi’s mandate did not include power to discipline, neither could he fire or hire, let alone reward performance.

As is found in most non-performing and unprofitable organizations, the most critical asset, which is manpower, is always a causative factor, just as it is in successful and profitable ones. When SIFAX acquired SAHCOL in 2009 from the BPE and Ministry of Aviation, which took it over from “Nigeria Airways-in-Liquidation” in 2003, the over 1,000 staff included some technical personnel in ground handling, who were well-trained under Nigeria Airways between the 1990s and 2001, but whose knowledge, arising from almost a decade of uncertainty and fallowness, had become residual, un-updated and verging on decadence. Uncertainty of job had become a huge de-motivating factor as workers were more concerned with thoughts about their future than the future of the company.

This situation produced a work culture devoid of passion and positives; one of impaired vision about the future and lacking in mission. And because virtually all the staff of SAHCOL at privatization were inherited from Nigeria Airways, the work culture bore the insignia of their parent company. It was one of passion for narrow professional identity as workers identified more with their professional colleagues and work teams rather than the organization. This produced change-and-progress-stifling inter-professional bickering, territoriality and quest for professional supremacy. All of these were not only highly dysfunctional and detrimental to the airline, but these were the defining elements of the workforce inherited by Skyway Aviation Handling Company from its precursor, Skypower Aviation Handling Company. Incidentally, both of them bear the same acronym – SAHCOL.

With a low take-off grant of N10 million in 1999, and the inherited low capacity ground handling equipment and cargo holding space, as well as make-shift offices, SAHCOL was not positioned for great success. Worse still, every month, or as the need arose, the airline finance directorate would go to SAHCOL to collect whatever has been generated to bail out the “baggy” Nigeria Airways.

In an effort to save SAHCOL from Barbington Ashaye’s ferocious liquidation machine, among other reasons, the then minister of aviation, Isa Yuguda, took back the company to the ministry and removed its general manager, Oluropo Owolabi. But Yuguda had no knowledge of handling services. The general manager he appointed, Laolu Owolabi, a career banker, also had no modicum of knowledge about ground handling services. Consequently, he had nothing to give to the workforce. This further dejected the already de-motivated staff. With this, the company slipped further down the slope. One could hear staff talking about their CEO who had no travel passport when he came but, who at the time of leaving under two years had filled three passport booklets, going round the world to exhibitions unaccompanied to inspect ground handling equipment he knew little or nothing about. Although Chike Ogeah took over the company on the removal of Laolu Owolabi in 2007, his focus was to transfer the company from the public to the private sector where he believed the company would achieve exponential development and growth. And this he carried out with clinical efficiency.

SAHCOL today

It is necessary to give this history stating precisely where and how the SAHCOL SIFAX took over was in order to clearly appreciate how phenomenal SAHCOL’s turnaround is. The SAHCOL (Skyway Aviation Handling Company Limited) we have today has an unambiguous roadmap, a development plan, projected growth and a vision “to become the leading provider of passenger, ramp and cargo handling services in the West Africa sub-region”. Its Mission Statement fully aligns with this vision. Today, we have a SAHCOL whose total estimated value is over N20 billion as against its pre-privatization value that oscillated between N2 billion and N4 billion depending on the parameters used.

At the time of privatization, SAHCOL had a staff strength of 1,179. Today, its staff strength is 1,510. The average age pre-privatization was 48 years. Today, SAHCOL has a largely vibrant, and trained, young workforce with an average age of 34 years.

The growth of any handling company depends, among other factors, on the cargo holding and warehouse capacity of its terminal. Before privatization, SAHCOL’s terminal space was about 5,900 square metres as against its current ultra-modern terminal, which covers a space of about 20,000 square metres. From 2002 when SAHCOL warehouse and custom processing sheds got burnt, up to the second week of December 2014, most of SAHCOL’s officers used make-shift 20/40-ft containers as offices. So much man-hour was wasted and lost as officers moved from one container-office to another scattered wide apart. Productivity suffered and customers lost valuable time. By the third week of December 2014, all officers had moved to SAHCOL’s new ultra-modern office complex that holds all departments. In addition, new four-storey complex for Customs, cargo agencies and all other outfits involved in cargo handling is near completion. The entire complex, terminal and office is reputed to be probably the largest and most integrated in Africa and similar to what is obtainable in Dubai.

In the area of handling equipment, at the time of privatization, SAHCOL had 253 serviceable ground-handling equipment and operated in 15 stations handling largely smaller and medium-size aircraft. Five years after, SAHCOL has 477 more modern serviceable ground handling equipment, operating in 17 stations in addition to ad-hoc handling services for Hajj and Umra operations. Its clientele today includes operators with modern wide-body aircraft.

Today, SAHCOL runs a business whose processes can be followed and predicted because of its transparency and good corporate governance. There are no blind spots, no blind alleys. Current records from SAHCOL show that five international operators – Emirates (Abuja), Ethiopian (Kano), DHL Aviation (Lagos turnaround), Med-View (Accra) and Royal Air Maroc (from end of January 2015), and two domestic operators, Azman and Discovery, have joined the list of their clientele, bringing the total to 21 as against about 12 at pre-privatization. The same records show a 13 percent increase in cargo income, an 11 percent increase in operating income and a 60 percent increase in Profit Before Tax in 2013.

Also in that same year, operating equipment worth over N1.05 billion was acquired with funds mostly through bank and equity contribution while the multi-billion naira office complex and the Custom/documentation building near completion were all financed with Internally Generated Revenue (IGR). Same is true for the newly-upgraded business-class lounge just opened second week of December 2014 after a long period of closure. The ambience, aesthetics and coziness of the new office complex are unequalled anywhere, not just in the aviation sector but in the transport sector in Nigeria and the sub-region.

While these facts are mind-blowing, what ought to boggle and engage the mind most is how SAHCOL’s transformation and turnaround was achieved. This is given the fact that about 75 percent of turnaround initiatives flounder or fail. Unravelling this is where the lesson lies for the industry and for our nation. The fact that urgent change was required in SAHCOL by the new owners, SIFAX, having paid a whooping N5.53 billion to acquire it cannot be over-flogged. But what change strategies were used?

How turnaround was achieved

A study of SAHCOL shows an adoption of what two Harvard scholars, Michael Beer and Nitin Nohria, in their article “Cracking the Code of Change”, called Change Theories E and O.

Theory “E” is based on economic value. Its kernel is to create value for shareholders, using restructuring, lay-offs and downsizing. Theory “E” believes that shareholder value is the only legitimate measure of corporate success.

The second, Theory “O” change strategies are geared towards building up the corporate culture, with a focus on employee behaviours, attitudes, capabilities and commitment. Theory “O” holds that organization’s ability to learn from its experiences is a legitimate yardstick of corporate success.

It is not known whether the ownership and management of SAHCOL were ever students of Beer and Nohria, and their other Harvard colleague, Jin Collins, who advanced “the power of catalytic mechanisms” as the crucial link between objectives and performance. But what is clear is that a combination of the two theories played out in SAHCOL’s phenomenal turnaround.

In a careful sequencing of the SAHCOL turnaround effort, the board, chaired by the vastly experienced and successful logistician and CEO of SIFAX, Taiwo Afolabi, along with his colleagues including his vice, Chike Ogeah, the visionary last pre-privatization MD of SAHCOL, who ensured transparent privatization of the company, first started off with the “E” strategies. They created a roadmap that redefined SAHCOL’s vision and mission. For two years, from 2009 to December 2011, they engaged in restructuring, repositioning and right-sizing of the company. Also, they made further investments and introduced some minor economic incentives.

The return of Oluropo Owolabi

Having completed this in about two years, December 2009 to December 2011, it was clear to the board that the company’s turnaround would not reach the desired destination unless the lofty visionary and missionary ideals put in place were translated into reality. For although Afolabi’s experience, acquitted and vast as it was, and Chike Ogeah’s great vision about a privatized SAHCOL, created the needed rampart for a firm transformation and change, neither of them had any far-reaching knowledge about the nitty-gritty of ground handling in action.

Thus, a turnaround manager who would apply critical elements of Theory “O” and evolve Collins’ “catalytic mechanisms”, which would turn the lofty ideals and objectives of ownership into reality, needed to be drafted. By January 2012, the board appointed Oluropo Owolabi, an acquitted turnaround manager of erstwhile liquidated Nigeria Airways, who after impressive service in MMIA, Rome, New York and the Americas was appointed the pioneer manager of autonomous SAHCOL under Nigeria Airways until 2004. The re-engagement of Owolabi was like the “return of the natives”.

Working with the board, he brought to bear his vast knowledge of ground handling, transferring knowledge through the use of those who already have the knowhow he injected into the system. He loosened control, empowered sectional heads to manage, take decisions and accept responsibility. With series of catalytic mechanisms which included extensive domestic and international training, re-skilling, retooling, incentive and reward system, Owolabi successfully linked lofty objectives with performance.

Today, there is no doubt that some organizations in the industry show flickers of hope; airlines like Arik, with its operational inadequacies, irrespective, leave us hope that we can operate new and modern equipment, while the likes of Med-View give us the hope that we can make great difference from little beginnings. Despite controversies surrounding its concession, MM2 gives some hope that well-structured Public-Private-Partnership (PPP) is possible. Skyway Aviation Handling Company leaves an indelible impression that turnarounds are possible owing to commitment, great vision and providing the right latitude to professionals with the right knowhow to run organizations. Fair enough to say then that there is hope after all, in the aviation sector and in our country.