“Good governance, Fiji Airways Board and Auditor General” (sent 1 Jan 214)

For “Opinion Piece” or  “Letter to Editor” (Fiji Times, Fiji Sun, Islands Business, Republika Magazine
1 January 2014

Good governance, Fiji Airways and Auditor General

As the 2014 election approaches, voters (and tax-payers) must not forget that governments must also be assessed by the performance of the public enterprise (PE) boards appointed by them. Are they  transparent and accountable to the tax-payers?

Take for example, Fiji Airways, half of which is owned by tax-payers, and which is also the recipient of a large Fiji National Provident Fund loan, serving as collateral for the purchase of three Airbuses.

In theory, boards  are ultimately responsible for the overall performance of the public enterprise (including the appointment of senior management), with the “buck” ultimately stopping with the Board Chairman. There should be no ministerial influence or interference whatsoever.

If the PE performance is poor, an accountable and ethical Board (and especially the Chairman) should resign.

When Dave Pflieger was appointed CEO of Air Pacific, the public was informed that the airline had made a $90 million loss.  Pflieger listed (Fiji Times, 16 July 2011) his long list of challenges: ensure the airline had the right skills and expertise; improve on airline basics such as safety; be on time;  ensure great customer service; fix the infrastructure, fleet, schedule, network; bring costs under control; and  renegotiate every contract from the cutting of the grass to staff contracts.  Pflieger stated he needed lots of external consultants to reform the airline, and he wanted to end the Qantas co-ownership of Air Pacific.

Even to a layman, Pflieger’s statements were a serious indictment of the Board of Air Pacific.  But Mr Nalin Patel and his board did not resign.

Under Pflieger, Air Pacific bought three Airbuses to replace the Boeings.  While some local pilots and other senior staff resigned, there took place an extraordinary barrage of advertising hype by the Board and management of Air Pacific, joined in by Government ministers and Permanent Secretaries, about the expected revolutionary impacts of the new planes, the change of name to Fiji Airways and the painting of new colours and a tapa motif on the planes.

Any Tom, Dick and Harry would know that the overall impact of the paint jobs, on actual aircraft and airline performance would be minor, although lots of Fijian women got paid to dance around when the planes arrived, while a few writers of Letters to the Editor announced how proud they felt as “Fijians” to see the newly-painted planes flying over-head (they apparently did not before).

Fiji also saw a new trend of Government ministers and Board members flying to France to “approve” and “receive” the Airbuses, when they had no technical expertise whatsoever to assess their suitability, and most of them would have difficulty flying a Fiji kite.

Then, to the surprise of many, and surely a “first in corporate history”, Pflieger flew the coop before the newly purchased birds flew a single commercial flights. 

With not a single public complaint from the Board, Pflieger was allowed to retire to a “win-win” situation: if Fiji Airways succeeded with the three new Airbuses, he could attribute it to his insightful “game plan”; if Fiji Airways did not succeed, it would be because the Fiji Airways team “did not follow his game plan”.  Fiji has seen this wonderful logic many times from our national rugby and soccer coaches when their teams win or lose.

Then, along came another CEO, Pichler, who pointed out (Fiji Times, 7 Nov 2013) that although Fiji Airways had bought the new aircraft, they did not have enough qualified pilots; facilities were not ready on the ground, and flight delays and cancellations cost the national carrier about $1 million per month.

Pichler’s internal taskforce found 40 different causes for the low on-time performance: management processes and structures had to be reviewed in all areas, as well as what routes to fly; there was a need to leverage skills and experience of existing staff and not rely on external one-man show consultants who drained the airline of millions of dollars.  Pichler advised “If the manager needs a consultant to tell him how to do his job, fire the manager”. What about the Board, some may ask?

To the relief of many, Pichler informed the public that he would maintain the links with Qantas and not break them as the previous Board and management had proudly and publicly proclaimed.  He honestly admitted they were trying to address a major problem that the new Airbuses could not service the existing export cargo demand without extra flights.   Pichler’s bombshell was that Fiji Airways needed a five year development plan .

Even a fresh business graduate would be puzzled: how could the Board of Fiji Airways have approved the purchase of three planes costing one billion dollars (with hundreds of millions of FNPF money thrown in as collateral) without a business “development plan” which at least covered the lifetime of the new planes, certainly more than five years?

In summary, Pichler pointed to a comprehensive litany of problems left behind by the previous CEO, with many of the new policies (presumably with the approval of the same board) clearly reversing policies of the previous CEO (and the same Board).

Fiji taxpayers should ask the Fiji Airways Board to explain what has been their role these last seven years, while policies have been reversed backwards and forwards.

Fiji taxpayers should ask why the Board and the Chairman have not already resigned or why they have not been sacked, given the litany of fundamental and comprehensive problems pointed out by the two CEOs, Pflieger and Pilcher?

One clue is that Mr Nalin Patel (Fiji Times, 6 Nov 2013) commended Commodore Bainimarama for “his vision and support” which allowed the national carrier to turn around from record losses, to purchase brand new wide-bodied aircraft, and for suggesting the third Airbus name (Yasawa i Ra)  “that will be seen by millions of people in airports around the world and will bring millions of people to Fiji.”  Oh really?

Is it the case that to survive in Fiji’s current political climate, all that CEOs and Board Chairmen have to do is attribute their successes (fictitious or real) to the “vision and guidance” of the Great Leader?

Perhaps starting with the FSC CEO, readers can start a list (which will no doubt grow longer as September 2014 approaches).

Students might want to google “psychology of brown-nosing” and read what comes up, starting with this:

http://www.n2growth.com/blog/beware-of-flattery/

Students in economics or business management could easily write a PhD thesis on the recent goings on at Air Pacific/Fiji Airways, by simply examining the relative responsibilities and performance of the boards, the senior management and government ministers.

But Fiji voters need to worry about the increasing Public Debt which must be paid by future generations, especially when a part of it has been needlessly created to cover failed public enterprises like the National Bank of Fiji, the Agriculture Scam, or the Fiji Sugar Corporation.

The “good news” is that Fiji Airways now appears to be on a better trajectory, with the latest Fiji Airways inflight magazine indicating moderate profits of around twenty million dollars.  But could the profits have been higher, or could past losses have been avoided or reduced with better board management and direction?

To protect their own current interests and that of future generations Fiji taxpayers must demand the public scrutiny and accountability of all public enterprises in which large amounts of their money are invested, not just Fiji Airways.

Can the Permanent Secretary of Finance please inform the public: is the Auditor General’s Office auditing the accounts of Air Pacific/Fiji Airways and are the audits publicly available?

Professor Wadan Narsey