BUSINESS FOCUS: KENYA AIRWAYS

‘The Pride of Africa’

KQ

Kenya Airways (KQ) is one of the icons that identify Kenya to the global community. Indeed, the livery with slogan ‘the Pride of Africa’ splayed proudly and beautifully along the body of the Boeing airplanes and all KQ merchandise tell a story of one of the greatest aviation companies in our generation. Initially using 4 strips as its livery running through the length of its fuselage, Pride of Africa slogan became synonymous with KQ, another rebrand from the accustomed KA. Since IATA airline code had to be adhered to, the Q has to replace the A. This was all back in 2005, and it gave the airline a rebirth and refreshed look in its operations. Through KQ, Kenya’s identity was easy to connect internationally due to the association with the aviation company. Certainly, Kenya Airways as a business is expansive with billion worth of investment and mind blowing revenues, returns and daily transactions on a global scale.

Ownership

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KQ Boeing lifting off

KQ is headquartered in Embakasi, Nairobi and runs its hub at Jomo Kenyatta International Airport (JKIA). Founded back in 1977, it tremendously to what it is now, a mega-complex international business organization. It is currently under a public-private partnership ownership with the government of Kenya taken the largest stake (48.9%), KQ Lenders Company (38.1%), KLM (7.8%) and 5.2% (various private owners). Privatization enables KLM to come into the picture, and acquired 26% of shares hence single highest shareholder. The government owns 23% of shares and the rest floated to the public (51%). This allocation was back in 1996, and 16 years later, in 2012, ambitions growth plans due to aviation realities and projections into the future brought about need to raise more capital. As such KQ announced rights issues for Ksh. 20 Billion for the expansion plans (a rights issue is that issue of shares offered by a company to its existing shareholders on a pro-rata basis to their shares. This enables the company raise more capital). The government increased their share amount from 23-29.8%, while KLM increased its stake from 26 to 26.73%. With so much investment from various stakeholders (government, a large aviation industry player, bank lenders, private owners), the complexities of running such a vehement cannot be undermined, with all these stakeholders wanting to be well represented, as far the stewardship of the business is concerned.

Stewardship

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Titus Naikuni, who was KQ’s MD between 2003-2014.

Ever since its formation and adjustment in structure and ownership changed hands and more control was required, KQ has grown from level to level. It is important to know who make the group of KQ tick. Between 2003 and 2014, Titus Naikuni was then the Group Managing Director. Within the time of his tenure, KQ registered high growth in revenues, passengers use on various routes; purchase of more Boeings to add to the fleet and expansion of networks to various other. Currently, the Group of Companies under the umbrella of KQ is being steered by Michael Joseph (formally CEO FOR Safaricom),

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Michael Joseph, KQ’s Non- Executive Chairman.

who serves as the Non-Executive Chairman from 2016, after the resignation of then Chairman Ambassador Dennis Awori. His role was to get the bleeding company healed and back on track, especially with sharp decline in revenues reported. His skill, resolve and business acumen was required to guide the sinking ship. Others on the board include:

  • Sebastian Mikosz, as Group MD, and CEO with over 20 years’ experience in public and private sector experience in executive management
  • Dick Murianki, as Group Director of Finance, with over 15 years in professional accounts experience and management
  • Ron Schipper as a Non-Executive Director
  • Professor Paul Mwangi Maringa
  • Nicholas Bodo, as Non-Executive Director
  • Kamau Thugge, as a National Treasury’s Principal Secretary, as monitoring government’s interests in KQ
  • Jos Veenstra, as a Non- Executive Director with responsibility in monitoring KLM’s corporate interests.
  • Major General (RTD) Michael Gichangi, as Non-Executive Director
  • Caroline Armstrong, as Non-Executive Director
  • Jason Kap-Kirwok, as Non-Executive Director
  • Festus King’ori, as Non-Executive Director.

What is/was so wrong at KQ

A critical look at the ailing airline reveals worrying concerns that were slowly over time bleeding it to death. KQ problems could be attributed to poor decisions made by the top management mandated with strategically providing a path for the aviation company. Operations inefficiencies also played a critical role slowing things down and wasting valuable resources, never to be recovered. The failure to counter the ever fierce competition in its markets including the Ethiopian Airline, South African Airways, Etihad Airways and Qatar Airways proved fatal. These airlines suited their fares; routes and service deliver to suit customers in the routes KQ used and with no counter measures, and KQ took a beating. Poor investment decisions in purchase and leasing of aircrafts caused huge debts due to mismanagement of available funds and not prioritizing.

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KQ’s major resource the staff have had rough times as the aviation company fixes its problems

Sticking to its old tasted ways, KQ failed to plan ahead and explore new routes, especially in emerging markets such as Africa and Asia. Its competitors were proactive researching and raising to the challenges and opportunities, as KQ grappled in the darkness, clueless. In the same line, its ticketing was not sensitive to the market forces, being too expensive and no-competitive, yet alternative carriers offered lesser costly tickets for same or even better carrier service. KQ was also reportedly notorious for frequent flight cancellation inconveniencing travelers. The situation was not helped either by a demotivated staff, who brought about poor customer service. This shunned of passengers, hence loss of revenue. These problems required short and long term solutions, and brave decisions needed to be made to save the once mighty carrier from collapse.

Effects

Many KQ staff were laid off and this did not auger well with majority of them who sought compensation, running into millions of shillings. Bad PR caused around the whole time did not do KQ any good, especially at a time it was mending its brand name and trying to get back to good books. Michael Joseph and the new MD, Sebastian Mikosz; a huge task of turning round KQ fortunes. It is currently on a turn around with major focus on the problems as pointed out:

  • Operational efficiency including exploring new routes, increasing frequencies of its flights along various strategic routes
  • Proper cost management, which will take more deliberate look at the purchase, lease and disposal processes and procedures with saving and profit in mind.
  • Effective human resource management to maximize productivity is also important, with proper acquisition of talent, training, and compensation of staff and taking care of their welfare.

Way forward

We all watched with dismay the collapse of NAKUMATT, a chain of supermarkets; crumbling from being top tier into a bundle of chaos and confusion. Certainly, this should not and would not be the case of Kenya Airways. The government has done its part, and much remains in the hands of the stewards running the ship, to steer it clear from the turbulence. Michael Joseph, tried and proven remains upbeat KQ will pull through and record good profits again. With a debt of over 1.4 USD, jittery creditors and unstable conditions surrounding the country after the elections, its one hell of a rough ride. the trading at NSE probably tale a story of the situation.

KQ (1)
January KQ Stocks trending at NSE: My Stocks

It is about time for people to earn what they are paid for, tie down lose ends and put things right. Optimism is good, but equally getting it right would be right for KQ. Over to you Joseph and crew. We want our Pride of Africa back!

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