KENYA: Kenya Airways Improves, Many Congratulations To Management

Over the last two years, Kenya Airways has weathered the most turbulent period in its four-decade history.

However, the airline has demonstrated resilience against the after-shocks of the poor performance recorded in the financial year 2014-15.

Pessimism about the airline’s prospects and future is slowly dissipating, thanks to aggressive measures geared to sustained recovery of the national carrier.

Kenya Airways is now on a promising trajectory. Operation Pride – the strategy to turn around the airline – is yielding fruit.

Some initiatives under the strategy have been successfully executed resulting in improved financial and operational performance.

In the last three quarters of 2016-2017 financial year to December, for instance, KQ flew 3.4 million passengers, the highest number in its four decades of existence.

We achieved this despite tight fleet capacity arising from the lease and sale of some aircraft as part of ongoing measures to manage costs.

A lot of this growth is coming from Africa, especially North Africa and East Africa where capacity grew by 9.6 per cent and 7.1 per cent, respectively.

From the foregoing, it is evident that Africa is contributing significantly to the airline's recovery. Indeed, Africa remains our mainstay and is at the heart of our recovery strategy.

For us, it’s not just about offering seamless connectivity, but also enabling the sustainable economic development of the continent.

Last year, we were awarded the African Airlines Association Outstanding Service Award for service delivery, innovation and competitiveness in the African aviation industry.

We are winning in Africa. We were recognised by the World Travel Awards as the leading airline in Africa and the best business class airline in Africa.

Fleet rationalisation is one of the core recovery initiatives. The other is network optimisation geared to growing revenue by capitalising improving connectivity.

This includes increasing flight frequencies on certain routes to maximise volumes and revenue. We are also in the process of reviewing certain strategic relationships with our key airline partners.

An example is our joint venture with KLM which has undergone a series of iterations in line with our network optimisation process. These changes will increase revenue from our European and North American markets.

This journey has been exciting though not without some challenges. It must be understood that the aviation business is perennially fraught with risks ranging from bad weather to currency volatility and uncertain oil prices.

Although our On-Time-Performance (OTP) – a measure of operational efficiency – has improved overall, we experienced delays in December owing to bad weather in Europe and the Middle East.

Also, and our subsidiary Jambojet had challenges on-boarding new aircraft resulting in delays over the Christmas period. We know that delays constitute a major pain point for our customers and are working hard to minimise such inconveniences.

Kenya Airways has also been losing pilots and engineers. We see this is a major area of concern and a risk factor to the organisation.

The Board has made some decisions aimed at attracting and retaining critical talent. Additionally, management has been working closely with the Kenya Airline Pilots Association, to drive productivity and find a winning formula on contentious issues.

Enhancing employee productivity remains a critical pillar of Operation Pride.

As such, the airline has had to let go of a number of employees and redeployed others within the organisation. But we do not anticipate any further major layoffs in the near future.

One major plank of our turnaround is the balance sheet optimisation. The work around this has been going on over the last six months.

I recognise the strong support and willingness of our financial partners to support the consensual approach to liquidit and deb reduction. We have made significant progress. The next two months will be crucial to the closure of this issue.

Let me take this opportunity to clarify that the Kenya Airways Board has reviewed the contract with Mckinsey, the consulting firm advising on the turnaround.

It was felt that since major initiatives under Operation Pride are now complete, the performance-based contract under which Mckinsey were hired required changes. Going forward, we will pay Mckinsey only for specific expertise.

All the remaining Operation Pride initiatives are being implemented by the KQ team under a Chief Transformation Officer, within Kenya Airways.

In a nutshell, Operation Pride is in cruise mode and there’s no turning back. Kenya Airways’ prospects are shining brighter by the day.

The dark days are certainly behind us. We may not be there yet but the gains so far achieved under Operation Pride are something to be proud of. I urge all Kenyans to support the national carrier as it enters its next phase of growth as the Pride of Africa.

KENYA: Kenya AirwaysTo Liquidate 600 Workers

Kenya Airways (KQ) will send home 600 employees in its rationalisation plan starting May 2016.

Airline officials hope the layoffs, which are part of the struggling carrier’s “Operation Pride” turnaround programme, will fly it to profitability.

The redundancies are likely to arouse a backlash from aviation workers’ unions, one of which has clashed with Kenya Airways on several occasions.

KQ Chief Executive Mbuvi Ngunze described the move as one of the “hard decisions” the airline has had to make to improve profitability.

He said the heavily indebted carrier would also re-examine its operating model and network and seek a long-term financial structure.

“The decision is not made lightly, and I want to thank all employees for their tremendous resilience and commitment in serving our guests in challenging times for the company.

“I am confident that with the support of all staff, unions, shareholders, creditors, financiers and all other stakeholders, Operation Pride will bring back the airline’s long term profitability and reconfirm our position as the Pride of Africa,” Mr Ngunze said.

The flag carrier hopes to recoup some Sh2 billion and spend it on various initiatives, mainly focused on increasing revenue and reducing costs.

KQ says its turnaround plan is on course, having disposed of some of her redundant aircraft and subleased others. The carrier also claimed to have reduced waste in catering, and renegotiated some contracts.

“So as to achieve these targets, the board has, after re-evaluating the various options, come to the painful decision that part of the required overhead savings will be derived from a decrease in staff headcount,” read a statement from the airline released late Thursday afternoon.

The 600 staff to be made redundant will be drawn from various departments and all cadres of staff. A list is being drawn detailing the specific positions to be eliminated.

KENYA: Kenya Airways Cuts Costs

First it was the change in senior management figures, thought to bear significant responsibility for decisions taken in the past which led Kenya Airways close to the financial abyss.

Then came the progressive disposal of surplus aircraft, by selling and leasing out the airline's Boeing B777-200's and B777-300's.

Third came the rationalisation of schedules, especially for the flights from Nairobi to London, avoiding the costly all day layover of a state of the art Boeing B787 Dreamliner aircraft on the ground, as the new schedule ensures an immediate turnaround.

While flights for instance to the increasingly profitable route to Antananarivo have been doubled, were other destinations with lesser traffic volumes seeing either the deployment of smaller aircraft or a reduction of frequencies to match actual demand.

A host of additional measures vis a vis contract revisions and re-negotiations of existing deals also yielded substantial financial results, as the Board of Kenya Airways went along to implement, step by step, the measures proposed by global management consulting giant McKinsey in a report presented to the Board in the last quarter of 2015.

Dubbed 'Operation Pride' is the airline looking at overall savings in the amount of 200 million US Dollars, to be achieved by both cost reductions and a rise in revenues.

Advances made in the areas described above however will not be enough and it is understood from usually reliable sources close to the airline that the Board of Directors has sanctioned a staff reduction programme which will see either re-deployment, where practicable and contractually allowed, or redundancies, with all required financial 'golden handshakes' of course being part of such measures.

As many as six hundred staff will be affected by these measures which will begin to take root in May this year and which, it is understood from another source, already have the backing of the company's largest shareholders, the Government of Kenya and KLM Royal Dutch Airlines.

Kenya Airways' Group CEO Mr. Mbuvi Ngunze, went on record earlier in the afternoon when he said: 'The decision is not made lightly, and I want to thank all employees for their tremendous resilience and commitment in serving our guests in challenging times for the company. I am confident that with the support of all staff, unions, shareholders, creditors, financiers and all other stakeholders, Operation Pride will bring back airline’s term and reconfirm our position as the Pride of Africa'.

It is expected that there will be hard talks ahead between the management of the company and in particular the unions, which will have to come to terms with a make or break scenario this time. Failing to address cost issues may drive the airline to the brink of financial failure should concessions not be made and compromise not be reached and, in this correspondent's humble opinion, East Africa's skies without Kenya Airways is simply unthinkable.

Were mistakes made in the past? The answer to that is a resounding yes but the current management, after replacing several top managers in recent months, is well on the way to put things right again and pave the way for a much improved future performance.