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Michael Joseph on KQ: My wife tells me 'just give up'

BUSINESS
By Patrick Alushula | Apr 17th 2022 | 5 min read
By Patrick Alushula | April 17th 2022
BUSINESS
Michael Joseph joined KQ board in 2016 at a time the carrier had posted Sh26.57 billion net loss. [David Njaaga, Standard]

Michael Joseph leads the boards of two different companies — one that is ranked the most profitable firm in Kenya and the region, and the other that holds the history of reporting the largest loss in corporate Kenya.

He is the chairman of Safaricom and leads the board in making key decisions to take the telco’s profitability to the next level.

But he is also the chairman of Kenya Airways (KQ), the national carrier whose ‘Pride of Africa’ tagline has not saved it from a nine-year loss streak.

In the last nine years, Safaricom’s accumulated profits add up to Sh419.13 billion — more than enough to fund all the 47 counties in a year — while KQ’s losses have accumulated to Sh146.27 billion.

Mr Joseph’s wife thinks her husband will exit KQ with a damaged brand. But he is not about to give up.

“It is a tough business. My wife tells me all the time: “Just give up,” said Mr Joseph in an interview with The Sunday Standard.

“The risk in the responsibility of me being the chairman of KQ is that Kenyans expect that I, Michael Joseph, can save and reproduce the financial successes at Safaricom.”

Mr Joseph was the founding CEO of Safaricom, growing the customer base from less than 18,000 in 2000 to over 17 million subscribers at his retirement in November 2010.

This growth, straddling nearly a decade, was motored by the launch of many innovative products and services. None has stood out more than M-Pesa.

Mr Joseph says unlike the experience at Safaricom, with KQ, he knew he was going where “everybody maligns you and shouts at you.”

He thinks KQ can return to profitability by 2025 and win back the hearts of Kenyans who now view the airline as a mysterious bottomless pit that is always feeding on taxpayers’ money, yet keeps growing weaker.

“All these people talking about wasting taxpayers’ money on KQ either don’t understand that this is a strategic asset of the country or understand but say so because it is politically a good thing to say,” he says.

Mr Joseph in 2016 agreed to join the KQ boardroom at a time the airline had posted a Sh26.57 billion net loss — then the highest in corporate Kenya for a listed firm.

The same airline broke its own record with a Sh36.22 billion net loss in 2020, with the CEO Allan Kilavuka saying Covid-19 “took a very bad situation and made it much worse.”

Mr Joseph, 75, says he fully understood that the appointment came with a risk of tainting his legacy as a CEO who gave life to M-Pesa — a platform that continues to awe Kenya and the world.

“I have a legacy to live up to. Looking at the situation at KQ and how hard it was, it would have been very easy for me to walk away and say ‘I don’t want my legacy destroyed by what I can or can’t do at KQ’.”

He says he firmly believes Kenya needs a national airline and that every citizen should do what it takes to save the airline and make it better.

Places such as Dubai, where temperatures are harsh, have been able to attract companies’ headquarters because of the connectivity offered by the Fly Emirates, he says.

But while he is rooting for KQ's rescue, it is not lost to him that mistakes were made and getting out of the woods is not going to be an overnight thing.

“We have made a lot of mistakes. We can’t deny it but some of the mistakes were not of our own making,” the chairman says, adding that weather, terrorism, Ebola and Covid-19 have all served to worsen the situation.

Mr Joseph is now pushing for the establishment of a pan-African airline group and argues that KQ, with 34 planes, is too small to compete successfully with the likes of the Fly Emirates and Turkish Airlines which each boast of over 100 aircraft in their fleets.

KQ and South African Airways (SAA) have already inked a framework agreement that will see the two airlines cooperate on services such as maintenance, training and catering on an arm’s length basis.

“The idea is to create a holdings company. We could call it Pan African Holdings Group. The shares will be held by the respective governments and each airline will still retain its name,” says Mr Joseph.

The concept is modelled around that of global aviation groups such as the International Airlines Group, which includes British Airways, Iberia, Aer Lingus, Vueling and Level.

Operating as one aviation group will help cut operating costs. But KQ and SAA will first have to prove that the idea works before they can convince other airlines to join.

“I am optimistic for the first time that we have a future. But first, we have to survive to have a future,” says Mr Joseph.

The National Treasury last year dropped plans to nationalise KQ and instead announced it would roll out a Sh147 billion ($1.3 billion) multi-year restructuring programme that includes taking over debts.

Treasury told the International Monetary Fund (IMF) it would take over the airline's debts and roll out a series of measures, including reducing the frequency of flights, cutting fleet size and laying off staff.

Mr Joseph says this is going to be a two-year process before the airline can see light at the end of the tunnel.

He adds that it was always tempting to try and go the SAA route, which opted for voluntary business rescue in December 2019 on the back of debts and years of mismanagement.

Legacy issues

KQ is confronted with legacy issues and will have to review its fleet size and flight frequency on some of its routes.

Mr Joseph is also alert to the tussle between the airline’s management and Kenya Airline Pilots Association (Kalpa) but says he finds the views of the association out of touch with those of individual members.

“I am yet to meet any of our flying crew that doesn’t agree with what we are trying to do. However, at Kalpa, it is different. I can never reconcile the individuals’ views of the members with the collective views of their union,” says Mr Joseph.

Treasury has allocated the cash-strapped carrier Sh36.6 billion to help with its reorganisation.

In the budget for the 2022-23 financial year, KQ will get the money as part of the government’s strategic investments in public enterprises.

This brings the total amount of capital injected into the troubled airline by the State to Sh63.2 billion after it was awarded Sh26.6 billion in the current financial year ending June.

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