Trouble continues to follow Kenya Airways

Kampala. Kenya Airways finds itself at crossroads as the numbers continue to failing, exacerbated by instability in management.
The airline, which is the largest in East Africa and one of the biggest in terms of fleet numbers in Africa, has been posting substantial losses since 2012 and it seems to have stuck in the red zone since.
In 2014, KQ, as it is popularly known, posted a historic loss of Shs925b, one of the biggest in Kenya and East Africa’s corporate history, marking a troubled period for the Nairobi listed and cross listed airline both in Uganda and Dar es Salaam.
However, according to financial results for the year ended December 31, 2018, released last month, the airline narrowed its losses down to Shs277.5b.

The narrowing losses could have been a highlight for chief executive Sebastian Mikosz but his surprise resignation will leave a vacuum in the troubled operations of the Kenya national carrier.
Mr Mikosz, who was hired in 2017 to turn around the airline, announced his decision to quit in December in a staff memo.
The resignation, which he said was informed by personal reasons, means he will leave ahead of June next year, when his contract had been expected to expire.

Instabilities in management
Since the retirement of long-serving chief executive officer Titus Naikuni, KQ has had some instability in its management with managers leaving before seeing out their contracts.
Mr Mbuvi Ngunze, who had replaced Mr Naikuni left in 2017 barely three years at the helm.

He has since joined a private equity firm - Catalyst Principal Partners - as a senior adviser.
Mr Mikosz, who speaks French, English, Russian and Polish, was appointed in 2017 to help stop KQ from “financial bleeding.”
He was tapped from LOT Polish Airlines, which he had previously helped to turnaround after a tumorous decade.

Therefore, his expertise in resuscitating struggling airlines, could have been key in how KQ has managed to narrow its losses from Shs925b in 2014 to Shs277.5b for the year ended December 31, 2018.
In his resignation memo, Mr Mikosz emphasised that it was his practice to always inform staff about management decisions before they reach the public, noting that he had made the decision to shorten his contract term on personal grounds effective December 31.
“I believe this is the ideal timing to begin a transition process to find someone who will continue with the turnaround initiatives that we began three years ago,” he said.

One of his key reforms, although he leaves before it has been achieved, was the desire for the Kenyan government to take decisive actions, in which he sought the airline to be nationalised or change its mandate to remove the dividend-paying requirement in order to compete.
This he argued, was not allowing the airline to compete with some of its peers that are state-backed.

Personal reasons
Kenya Airways chairman Michael Joseph confirmed the exit in a separate memo, citing “personal reasons” for the resignation.
“As you are already aware, Sebastian will be leaving us at the end of 2019. Although I am really sad to see him leave, this has been a result of long and personal discussions with myself and the board and with his family,” Mr Joseph said.

In his memo, Mr Mikosz said he had done his best to turn around KQ, noting that the remaining seven months to December, he would continue to deliver improvements that management has been executing.
“I must point out that I am particularly proud of all of you ... our collective efforts have managed to bring the company from a historic loss in 2014 of Shs925b… My clear intention is not to slow down for a single day, and we will continue this improvement trend as I am convinced KQ is on a good path for a full recovery,” he said.

Persistent losses
Kenya Airways, known by its international code KQ, continues to grapple with losses as cost-cutting measures put in place to boost its bottom line are yet to bear fruit.
The Shs277.5b net loss for the year ended December 2018 came on the backdrop of higher costs that offset a growth in revenue.
Mr Mikosz, a Polish citizen was hired in June 2017 to turn around the airline that last year reported an after-tax loss of Shs277.5b, compared to Shs236.8b for the year ended December 2017.
On April 30 during release of KQ’s financial results Mr Mikosz said he was drawing encouragement from “an improvement in the company’s underlying performance.”

“These are decent results. They are not an explosion of success. The overall situation is improving. The investments are paying. And the losses are trimming,” he said.
Mr Mikosz, whose term was due in June 2019, said he is betting on fleet expansion, adding new routes and collaboration with African airlines that are seen to pose a threat to KQ’s regional market share, for a better outlook in 2019.

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