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Abstract Of Absorptive Capacity And Organizational Resilience Of Aviation Industry In Port Harcourt, River State- Nigeria

Abstract

Resilient organizations thrive despite experiencing conditions that are surprising, uncertain, often adverse, and usually unstable. We propose that an organization’s capacity for resilience is developed through strategically managing human resources to create competencies among core employees, that when aggregated at the organizational level, make it possible for organizations to achieve the ability to respond in a resilient manner when they experience severe shocks. We begin by reviewing three elements central to developing an organization’s capacity for resilience (specific cognitive abilities, behavioral characteristics, and contextual conditions). Next we identify the individual level employee contributions needed to achieve each of these elements. We then explain how HR policies and practices within a strategic human resource management system can influence individual attitudes and behaviors so that when these individual contributions are aggregated at the organizational level through the processes of double interact and attraction–selection–attrition, the organization is more likely to possess a capacity for resilience. The researcher seek to investigate the absorptive capacity of organizational resilience of aviation industry in River state Nigeria. In the cause of the study the researcher set out to achieve certain objectives that will be of great benefit to the aviation sector in Nigeria, this led to the formulation of research questions and hypotheses which aide the analysis of data generated by the researcher.

Chapter One Of Absorptive Capacity And Organizational Resilience Of Aviation Industry In Port Harcourt, River State- Nigeria

INTRODUCTION

  • Background of the study

In turbulent, surprising, continuously evolving marketplace environments only flexible, agile, and relentlessly dynamic organizations will thrive. In fact, firms often must be able to move beyond survival and actually prosper in complicated, uncertain, and threatening environments. Unstable environments create frequent challenges and even relatively stable marketplaces experience occasional jolts or undergo periodic revolutionary shifts. Often these events are viewed negatively, but as Sutcliffe and Vogus (2003) explain, resilient organizations are able to maintain positive adjustments under challenging conditions. Resilient firms actually thrive and become better in part because they faced and overcame serious challenges. Similar to a firm’s efforts to encourage strategic flexibility (i.e., the ability to change direction on short notice at low cost), efforts to build a capacity for resilience presume that change and surprise can be sources of opportunity as well as signs of potential threat, but that to capitalize on these opportunities often requires organizational transformation. In this paper we explain how firms can develop a capacity for resilience, why this capacity enables a firm to more fully realize the benefits that changing opportunities present, and we highlight the important role that strategic human resource management plays in both developing and using a firm’s capacity for resilience. The global aviation market recorded a sub-optimal performance in 2016. It is estimated that full year profits are 5.6%, or about $10.42 per passenger.1 This shows a marginal improvement over the previous year. (It is low when compared to the average profit-ability of industries such as finance and technology with net profit margins of 17.14% and 17.23% respectively.)  Lower oil prices have kept operating costs at a record minimum, and thus helped to increase profitability. This is not the case for the African aviation industry. Although East Africa remains resilient, losses in other regions are too significant to offset gains. Exchange rate depreciations have tempered the advantages of lower oil prices for most of the continent. Thus, the region is expected to lose $500 million in 2016.  The Nigerian aviation industry has borne the effects of the economic downturn. Two factors played a major role in its underperformance: the unavailability of foreign exchange (forex) and the decline in demand for airline services.

Foreign airlines have been unable to repatriate revenue. Through repatriation, airlines convert their profit into dollars and then into their local currency (e.g. Euros or pounds, where applicable). The scarcity of dollars has trapped funds in naira, rendering them essentially unusable to airlines who deal with foreign currency.

Funds repatriation is extremely important for day-to-day activities for the airline industry which operates on a thin profit margin. While airlines like Lufthansa and Emirates have reduced flight frequencies, some others (United & Iberia) exited the market entirely due to this problem. Most airlines have been forced to buy a portion of the dollars they need from the parallel market. This is not an effective strategy because it creates an excess forex demand and mounts pressure on the naira.

Additionally, airlines make a conversion loss when using the black market rate. For example, a ticket that costs N250,000 equals $819 at the interbank rate (at N305/$), but only $520 (at N480/$) at the black market rate. To cope, airlines have stopped or significantly reduced the sale of naira tickets to avoid the loss. By forcing customers to pay for tickets in dollars, airlines reduced the risk of conversion losses.

At the end of Q2, some $591 million of non-repatriated funds were trapped. Although airlines got a share of the $1.48bn forward contract settlement at the end of Q3, there is still an estimated $400bn of blocked funds (at minimum).

For domestic players, the forex shortage has led to scarcity of imported aviation fuel. Marketers have complained about the challenge to source dollars to import aviation fuel. There is a school of thought that suggests that oil marketers intentionally import less oil than is needed to meet demand. This creates an artificial scarcity and keeps the price high. Jet A1 fuel prices are approximately 100% higher than they were in Q4’2015.

 

High fuel prices and landing charges have kept operating costs at a peak. Many domestic carriers have turned to debt financing which, in the current regime of high interest rates, has proved to be a more expensive alternative. The result has been increased flight cancellations, delays and reduced customer satisfaction. The bigger domestic airlines have struggled to stay afloat, despite the increased patron-age from Nigerians who prefer the relative lower ticket fare, naira pricing, and more baggage allowance these airlines offer.

Additionally, the aviation industry has been affected by the paradox of thrift. This is the economic idea that states that people generally spend less and save more in periods of economic down-turn.

This can be traced back to the depreciation of the naira, which combined with rising consumer prices, has eaten away the earnings of the average consumer leading to sharply lower disposable income. Just as basic economics implies, when faced with limited resources, rational economic agents choose between available options. Consequently, the reshuffling of priorities and the change in consumption patterns has prompted a fall in the demand for air travel. Families cancel vacation trips, prospective post-secondary students enrol in Nigerian universities instead of British, American or Canadian Institutions, while business meetings are replaced with conference calls. Thus, in 2016, passenger load factors dwindled by 15% for international and 20% for domestic flights.

These issues have squeezed the profit margins of domestic and international players operating in Nigeria. While International carriers, having profits from other markets, have coped better in the present crisis, the smaller revenue base of domestic airlines has caused them to almost topple over. Thus 2016 saw airlines (e.g. Aero and First Nation) suspend operations, as rising costs, falling revenue and static demand in the industry have caused their balance sheets to bleed.

  • STATEMENT OF PROBLEM

The future health of the aviation industry is affected by the direction of global economic performance. The global economy will see a growth of 3.4%, higher than the 2011-2015 average of 2.61%. The global aviation sector is expected to reflect this trend and expand marginally.  The Nigeria economy went into recession late last year which resulted in the deterioration of the growth of the aviation industry and reduction in flight rate in the country, these also led to the closed down of some airline company which in the long run has effect on the aviation industry. It is on this backdrop that the researcher intends to investigate the absorptive capacity and organizational resilience of the aviation sector in River state Nigeria.

 

1.3 OBJECTIVE OF THE STUDY

The main objective of the study is to ascertain the absorptive capacity and organizational resilience of the aviation industry in River state, Nigeria. But to aid the completion of the study, the researcher intends to achieve the following objective;

  1. To ascertain the absorptive capacity and organizational resilience of the aviation company in River state.
  2. To ascertain the role of human resource manager in developing organizational resilience in the aviation sector
  • To investigate the relationship between human resource management quality and organizational resilience
  1. To ascertain the impact of efficient HRM in the development of absorptive capacity in the aviation sector

1.4 RESEARCH QUESTION

For the successful completion of the study; the following research question was formulated by the researcher;

  1. Is there absorptive capacity and organizational resilience in aviation sector in Rivers state?
  2. What is the role of human resource manager in the development of organizational resilience in the aviation sector?
  • Is there any relationship between human resource management and organizational resilience in the aviation sector?
  1. What is the impact of effective human resource management in the development of absorptive character in an organization?

1.5 RESEARCH OF HYPOTHESES

To aid the completion of the study; the following hypotheses are formulated by the researcher;

H0there is no absorptive capacity and organizational resilience in the aviation sector

H1there is absorptive capacity and organizational resilience in the aviation sector

H02human resource management does not play any role in the development of organizational resilience in the aviation sector

H2human resource management does play a significant role in the development of organizational resilience in the aviation sector

1.6 SIGNIFICANCE OF THE STUDY

It is conceived that at the completion of the study, the findings will be useful to federal airport authority of Nigeria (FAAN), as the findings of the study will guide them in rendering constructive advice to the management of the aviation companies in Rivers state. The study will also be of important to the management of aviation company as the the study seek to pinpoint the enormous benefit of organizational absorptive capacity and organizational resilience in the aviation sector in River state, Nigeria. The study will also be beneficial to researchers who intend to embark on study in similar topic as the study will serve as a guide to their study. Finally the study will be beneficial to academia’s students and the general public.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the absorptive capacity and organizational resilience of the aviation industry in Rivers state Nigeria.  in the cause  of the study; there were some factors which militated against the scope of the study;

(a)Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.

(b)Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

(c)Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.8 STUDY AREA

Port Harcourt is the capital and largest city of Rivers StateNigeria. It lies along the Bonny River and is located in the Niger Delta. As of 2016, the Port Harcourt urban area has an estimated population of 1,865,000 inhabitants, up from 1,382,592 as of 2006. The area that became Port Harcourt in 1912 was before that part of the farmlands of the Diobu village group of the Ikwerre, an Igbo sub-group (a controversial claim). The colonial administration of Nigeria created the port to export coal from the collieries of Enugu located 243 kilometres (151 mi) north of Port Harcourt, to which it was linked by a railway called the Eastern Line, also built by the British.

In 1956 crude oil was discovered in commercial quantities at Oloibiri, and Port Harcourt’s economy turned to petroleum when the first shipment of Nigerian crude oil was exported through the city in 1958. Through the benefits of the Nigerian petroleum industry, Port Harcourt was further developed, with aspects of modernization such as overpassescity blocks and taller more substantial buildings. Oil firms that currently have offices in the city include Royal Dutch Shell and Chevron.

There are a number of institutions of tertiary education in Port Harcourt, mostly government-owned. These institutions include, Rivers State University of Science and TechnologyUniversity of Port HarcourtRivers State College of Arts and ScienceIgnatius Ajuru University and Rivers State College of Health Science and Technology. The current Mayor is Soni Sam Ejekwu. Port Harcourt’s primary airport is Port Harcourt International Airport, located on the outskirts of the city; the NAF base is the location of the only other airport and is used by commercial airlines Aero Contractors and Air Nigeria) for domestic flights. Port Harcourt was founded in 1912 by Frederick Lugard, governor of both the Northern Nigeria Protectorate and the Southern Nigeria Protectorate. Its purpose was to export the coal that geologist Albert Ernest Kitson had discovered in Enugu in 1909. The colonial government caused the people of Diobu to cede their land, and in 1912 the building of a port-town was started. Other villages that were later absorbed into the city included Oroworukwo, Mkpogua, and Rumuomasi; In the creeks to the south of the original port were the fishing camps and grounds of the OkrikaIjaw group.

During the First World War, Port Harcourt was used as a point for military operations against the Central Powers in German Kamerun. After the discovery of crude oil in Oloibiri in 1956, Port Harcourt exported the first shipload from Nigeria in 1958. Port Harcourt became the centre of the Nigerian oil economy and it subsequently reaped benefits of its associations with the petroleum industry by undergoing modernisation and urbanisation. Port Harcourt’s growth is further due to its position as the commercial centre and foremost industrial city of the former Eastern Region; its position in the Niger Delta; and its importance as the centre of social and economic life in Rivers State. After the Republic of Biafra seceded from Nigeria in 1967 Port Harcourt fell to Nigerian forces on 19 May 1968. From an area of 15.54 km2 in 1914, Port Harcourt grew uncontrolled to an area of 360 km2 in the 1980s

The main city of Port Harcourt is the Port Harcourt City in the Port Harcourt local government area, consisting of the former European quarters now called Old GRA and New Layout areas. The urban area (Port Harcourt metropolis), on the other hand, is made up of the local government area itself and parts of Obio-Akpor accordingly. Port Harcourt, which is the current capital of Rivers State, is highly congested as it is the only major city of the state. In 2009, a law was passed by the Rivers State House of Assembly and governor Amaechi’s administration to spread development to the surrounding communities as part of the effort to decongest the Port Harcourt metropolis. The Greater Port Harcourt region, spans eight local government areas that include Port Harcourt, OkrikaObio-AkporIkwerreOyigboOgu–BoloEtche and Eleme. Its total population was estimated at 2,000,000 as of 2009, making it one of the largest metropolitan areas in Nigeria

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