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Aviation Banking New banking system uses Banking New joint venture targets
local service team: P35 markets beyond the islands: P35

Challenges of managing island airlines

By George Faktaufon must in future be even more focused on hu- it could mean slavishly following the basic
man relationships within the company. But principles of an LCC.
A CORPORATE leader of any organisation whether that means being cuddly or being This invariably requires people skills that
requires an unusual, sometimes extraordi- cruel to be kind is not a template judgment. extend well beyond internal inspiration,
nary range of skills. For the region’s carriers, it is where through to being able to establish strategic
Inevitably not every CEO has these; nor change is hardest to take on board that it partnerships, including perhaps new forms
does having the skills necessarily always is most needed – and where the test of a of cross-border partnerships, allowing the
triumph over external forces, which require CEO’s mettle is the greatest. airline to establish intra-regional opera-
skill sets, particularly in an industry which There is another challenge, not unique tion in a bilaterally controlled international
is undergoing major upheaval. to airlines, but of vital importance: coming market. The skilled leader, however, will
Arguably, given the complexity of the to grips with IT-related change. Apart from also probably be forced to guide his airline
airline business, a leader in this industry the legacy computer reservations systems, through a process of evolution, as external
has greater demands placed on him. Today there are other IT related solutions that the conditions change. Recent, apparently suc-
the region must seem a particularly hostile airlines are slow to embrace, such as big cessful examples of this type of innovation
place for the airline managements and their data and subscribing to Global Distribu- include the Air Niugini/Solomon Airlines/
workforces, under siege from all directions, tion Systems to ensure they have exposure Air Vanuatu tri-partite arrangement on the
including fierce competition from low-cost to the global travel trade. Airlines handle Port Moresby-Honiara-Port Vila route
models which are changing the demands purchases of a million dollars of metal. And here, to return to the heavy burden
made on the competition. Many govern- After all that’s what the airline business on the airline CEO-cum-COO, Peter Drucker
ments are moving towards freer skies(with is about, flying aeroplanes – or is it? But emphasizes that the top manager cannot
few exceptions) and therefore hiding places when it comes to solving intricate IT (and afford to be bogged down in day-to-day op-
become scarce. big data) needs, there is reluctance to spent erations: that “purposeful abandonment” is
Inertia and instinctive attempts to main- the necessary money. Airlines are typically a precursor to innovation.Too often today,
tain the status quo, are not a long-term institutionally weak in risk management. the CEO must be involved not only in the
option in an industry being turned on its This may seem odd for an industry that thought processes but also the execution
head, so decisions have to be made, not all is so risk prone. Despite the wide array of too many functions. Innovation can get
of them pleasant. Change is not optional. of uncontrollable external hazards in par- out of reach. When markets grow and ex-
Yet many of the regional airlines are slow ticular, risk minimisation and management pand, the simple fact of market expansion
to adapt; often little has changed funda- is typically distributed across a variety of provides an escape valve; keeping staff con-
mentally in their culture. corporate areas, so that inherent strategies tented is a lot easier when the organisation
The sound philosophy presented by the are hard to find. is growing. Employee desperation does not
IATA Oversight Safety Audit is still looked The constant ones, such as fuel prices exist in expansion environments.
upon by the airlines as another layer of and currency management, will typically be Meanwhile, where markets are stagnat-
compliance. IOSA however focusses more the responsibility of the corporate treasury, ing and new entrants are challenging the
on continuous improvement that will not whereas management of “unanticipated” status quo, expansion is difficult and cost
only enhance safety but reduces waste (a events such as bomb threats, natural disas- reductions become inevitable – ideal con-
large and often hidden cost in the airline ac- ters, accidents, government tax impositions ditions for disharmony and union unrest.
counting system), and resulting in greater and any one of numerous events with a po- In those circumstances, we have seen that
efficiency and increased profitability. tentially serious impact on the bottom line, reducing staff costs seems to be the only
The successful airline CEO’s profile must are dealt with across a number of “silos”. lever to pull, but can the airline have a
in future be even more focused on human Each shock may be extraordinary, but sustainable future? Incremental change
relations within the company, something they share a common theme that one or certainly cannot be the solution anyway.
we need to seriously work on. Building other occurs with almost clockwork regu- Here is where the great CEO’s human
local expertise in all levels of the airline is larity – a phenomenon that is constant in talents are most appreciated. Innovation as
so important yet not prioritised by most the airline industry. As the late manage- a goal may appear a lot more remote, but
airline CEOs. Governments need to ensure ment guru, Peter Drucker, observed: change keeping the workforce onside and informed
that the development of local personnel, provides the opportunity for innovation, of company goals is central.
in specialised areas and in particular at but urged that the process be systematised. The human element takes on a priority
management level, is a prerequisite for Unless there are systems in place, the de- like never before because without the cor-
expatriate work permits and ensure there fault position too easily becomes resistance porate will to restructure and adjust, profits
is mechanism for monitoring and enforce- to change, not innovation. and processes – simply cannot be achieved.
ment. As competitive pressures on airlines Few industries are undergoing more So faced with today’s challenges, defin-
increase, growth could slow down and change than airlines, yet the opportunities ing the ingredients of the region’s airline
restructuring and cost reduction could to innovate are seemingly going begging, CEO leadership must vary according to
become the norm, so the choice between where incremental change is happily mis- time and place.
confrontation or consensus seeking will be- taken for revolution. The LCC airline, by
come more stark. One likely implication will contrast, has all to gain and nothing to lose. Continued overleaf
web link:
be that the successful airline CEO’s profile Innovation is a prerequisite, and perhaps
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Islands Business, November 2017 33