More changes expected at Kenya Airways as it starts its turnaround plan

More top Kenya Airways managers could be pushed out as the airline starts implementing a turnaround plan after sinking into massive losses.

National Treasury Cabinet Secretary Henry Rotich said the Government and the airline have agreed on the plan, which is now being implemented to turn the airline’s fortunes around.

Kenya Airways Group Finance Director Alex Mbugua (middle) explains to the Senate Select Committee why they turned down a deal of over 322 million US Dollars to lease the air crafts together with Kenya Airways Group Human Resources Director Alban Mwendar (left) and Kenya Airways Head of Finance Mary Mwenga at the Parliament building on Friday,7th August, 2015. (PHOTO: ANGELA MAINA/ STANDARD)

“The plan is now taking shape and we are in the final stages of implementation. We receive constant briefs from the management on what actions they are taking. The main highlights of the plan is revenue management, cash flows, stopping the airline from further bleeding as well as cost restructuring. On our part we shall provide support in terms of resources,” Rotich told The Standard in an interview.

Rotich said there is a restructuring plan that has complete details of both management changes and where the airline needs to cut costs. It also has details of the new capacities needed at the airline. The Government is, however, yet to decide how much it will pump into the airline. Initial estimates showed that the airline would need about Sh60 billion in new capital injection.

“That figure (Sh60 billion) is yet to be concluded. The airline has hired a transaction adviser who should look at the total requirements and give advice on the equity and debt ratios,” Rotich said. The airline’s Finance Director Alex Mbugua was sent home on Tuesday, making him the first casualty of the restructuring plan after serving almost eight years at the national carrier.

Mbugua, who has had to deal with hard questions on how the airline handled its fuel hedging and procurement of aircraft, left the airline on Tuesday, several weeks after Parliament called for the sacking of top managers following a Sh25 billion loss.

The Parliamentary report by Senate’s Select Committee on The Inquiry into the Affairs of Kenya Airways Limited and Its Subsidiaries had recommended an immediate restructuring of the current management team at the airline as one of the main conditions to get any additional capital injection from the government.

“The shareholders should provide a financial bailout in form of equity under the following conditions, a reconstitution of the Board of Management by the major shareholders, restructuring and putting into place a management team with sufficient skills and experience in the aviation industry, with ability to turn around and build the company,” the report reads in part.

Senate also wants the airline to hire a new ‘marketing director with proven international experience to turn around its ticketing system and ensure proper accounting of revenue from market sales’. The airline’s management has been accused of making a series of poor decisions, including the ambitious Mawingu expansion project that led to excessive leasing of aircraft and left the company with a heavy debt load.

Mr Mbugua was at the centre of the aggressive expansion plan that has been blamed for its current troubles. The Government already gave the airline Sh4.2 billion short-term shareholder loan when it flew into financial turbulence.

Interview process

Kenya Airways said in a statement on Tuesday that it had appointed its cargo manager, Dick Murianki, as the acting group finance director, to replace Mr Mbugua immediately.

Kenya Airways board Chairman Dennis Awori said the position will be substantively filled through a competitive interview process to be undertaken in due course. Mr Murianki is currently the General Manager of KQ Cargo. He been with the airline industry for over 12 years and has served in various roles in Kenya Airways including as finance manager, commercial business performance manager and head of financial control.

Prior to joining Kenya Airways, he worked with Ernst and Young Public Accountants for over eight years in accountancy and business consultancy roles. He holds an MBA from Moi University, and a Bachelor of Commerce degree from the University of Nairobi.

Amb Awori also announced the resignation of Mr Joseph Nduva Muli from the Board and the appointment of Irungu Nyakera, the Principal Secretary for Transport, as his replacement.