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Monday, October 21, 2019

KQ kicks off turn-around strategy today

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The following report was first published on Capital FM

A turn-around strategy expected to see national carrier Kenya Airways ‘take-off’ to profitability will be executed starting Wednesday, according to the airline’s management.

During an appearance before the Senate select committee inquiring into the affairs of the national carrier, KQ Group Finance Director Alex Mbugua said the strategy developed by American multinational management consulting firm McKinsey would ‘cure’ the ‘curse’ of loss-making that the airline has been grappling with after recently posting a net loss of Sh11.9 billion in the half year ending September 2015, marking a 14 percent drop from Sh10.4 billion same half last year.

The turn-around strategy dubbed ‘Winning in Africa’ has a 24-point plan expected to eventually lead the airline to success.

“We have a new plan which will be implemented in the next 18 months. It is a plan we hope will bring a turnaround in the company,” said Mbugua adding that the roadmap had already been approved by the board and the government.

Mbugua declined to divulge details of the strategic plan saying competitors may hijack it.

Without going into details, Mbugua expressed confidence in the arrangement further stating that “major decisions were imminent.”

Mbugua said they had noted the importance of competiveness with the influx of different providers which have since ‘thinned’ KQ’s market share.

“One of the things we are going to start with is how we sell, how many times do we visit the agent and how we handle the agent,” he said.

“We are ready for the next phase and it’s about culture and management change and a new way of thinking.”

He said the airline had an outstanding debt of $70 million owed to suppliers saying they had been unable to pay up because they had no money and that the airline now was on a capital raising bid.

He disclosed that as part of the airline’s bid to manage debt, they were seeking to have the payment of the current short-term loan of $250 million dollars given by local banks increased to seven years to enable them raise more monies.

“We are also engaging government for long-term financing and are looking to raise a significant amount through shares or additional debt so as to first settle the suppliers who have been patient with us,” added Mbugua.

Despite KQ defending fuel hedging as having saved them money, it is reported that McKinsey could propose its elimination.

On the concern that the airline could be losing revenue through leakage, the management stated that they were currently looking for a forensic auditor to conduct audit and determine whether this was the case.

“We don’t believe there is any revenue leakage in the company. We are concern about the issues of leakage and the board has decided to seek a forensic audit firm,” he said.

The management also disclosed that talks with the government were at an advanced stage to compel it to ensure every government official uses the national carrier despite it being more expensive as ‘charity begins at home’.

Makueni Senator Mutula Kilonzo Jnr (Makueni) questioned the company has never been audited yet it receives public funds the latest being Sh4.6 billion.

Mbugua who has been a member of the board for the past eight years said, since its privatization in 1996, no audit had been conducted.

Committee chairman Anyang’ Nyong’o (Kisumu) and James Orengo (Siaya) questioned the management over why it outsourced for more staff and laid off others.

“You cannot solve your Human Resource issues by cutting down on the right of workers,” said Orengo.

HR Director Alban Mwendar had stated that the outsourced cabin crew had cost them Sh50,000 while the local cabin crews were paid Sh205,000.

“To sustain an organisation that is limping, you have to make drastic changes,” Mwendar told the committee.

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