What KQ needs to be profitable again

Wednesday November 1 2017

Kenya Airways

Kenya Airways chief executive officer Sebastian Mikosz addresses a media roundtable at KQ headquarters in Nairobi on September 21, 2017. The KQ board also needs an urgent overhaul. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

By JAMES KARIUKI
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When?Polish national Sebastian?Mikosz was appointed the?chief executive officer of the national carrier, Kenya Airways, there were mixed reactions from?stakeholders.

However, there was a sense of optimism that the new management would?turn the airline?around from its financial headwinds.

Since Mr Mikosz replaced Mr Mbuvi Ngunze as the managing director?on?June 1, he has continued with the same austerity measures?that had been put in place.

The airline has been downsizing - selling some aircraft and leasing others.

RESTRUCTURE

This has led to its fleet?shrinking by about 30 per cent.

The number of employees has also been reduced, and about 100 more are to?be?laid off.

However, the airline needs to go further and be bolder in its restructuring.

Some functions can be merged to have a lean and efficient team.

For instance, the positions of chief operating officer and ground services director?can be collapsed into one as they perform almost similar roles.

KQ BOARD

The board also needs an urgent overhaul.

As the airline continues to cut excess fat, the board remains intact with two levels of executive and non-executive?members.

The two sets are drawing massive allowances from an airline steeped in debt.

These are the unjustified costs KQ needs to shed?on the track to profitability.

There are other critical areas that Mr Mikosz needs to address, one of which is building a band of loyal local customers.

CUSTOMER EXPERIENCE

Aviation experts agree that for an airline to be profitable, local clients?must form a critical part of its volume of passengers.

Kenyans who fly frequently are mostly traders management should pay special attention to.?

China Traders Group, which I chair, comprises traders who fly for business between Kenya and China.

We had a number of meetings?with the previous leadership with a view to making KQ our preferred airline.

We reached mutually beneficial agreements, especially on the Nairobi-Guangzhou route.?

Ever since, we make a sizeable number of the travellers in the 400-seater Boeing 777 plying the route.?

TRADERS

Our group had?also engaged?the previous leadership on ticket prices and got a favourable response.

Realising how crucial traders are in the airline’s profitability, our group was allocated a shop on Accra Road, Nairobi.

There was also an account manager handling traders’ needs.?

Unfortunately, Mr?Mikosz closed down the shop as soon as he was appointed.

This move risks alienating the traders and driving them to rival airlines.

COSTLY TICKETS
Compared with its competition, KQ’s fares are higher.

Expensive tickets, especially for those flying from Nairobi to various destinations, have long been the bane of KQ’s takeoff.?

For example, a ticket from Johannesburg through JKIA to Guangzhou costs $650 (Sh67,470) whereas the fare from Nairobi is $800.?

Why the glaring discrepancy? Such are the primary reasons KQ has been losing ground to foreign carriers.

FOREIGNERS
We also need to question the wisdom of flooding the airline with foreign managers.

While what matters now is putting the airline back on the profitability runway, we should not also appear like we do not appreciate local talent.

The MD brought five new managers from Poland. We now have 10 foreign directors and managers.

There should be a blend in the top management to show that this is our national carrier.

We have an influx of foreign managers at a time when the government stake has increased to 46 per cent.

OWNERSHIP

We have reduced KLM’s shares to a paltry 13 per cent.?

Thus, KQ is largely Kenyan in ownership and the top leadership should reflect that.

Kenyan banks, too, have pumped?in?money and are believed to be owning the lion’s share of the majority stake?held by Kenyan entities.

While we agree that local managers have partly contributed to the KQ mess, we should not lose sight of the fact that there are some talented Kenyans who can do an excellent job to help to help turn around the airline.?

CULTURE

There are challenges that come with foreign managers.

First they have to grapple with culture shock and it may take time to adjust and perform optimally.

Chairman Michael Joseph, who had an illustrious tenure as the CEO of mobile phone company Safaricom, once said that “Kenyans have peculiar calling habits”.

Kenyans have peculiar flying habits, too, that should be understood by service providers and airline managers.

Mr Kariuki is the chairman of the China-Dubai Traders Group. [email protected]


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