Tag Archives: Kenya Airways

Leaner, Fitter KQ at 40

Kenya Airways (KQ) just released their quarter three operational  results for December 31 (2016). Continuing on the restructuring changes that came after they announced their last financial results, theThe fleet and seats available for sale was 3% smaller as a result of off-loading idle aircraft from the fleet, through sale of Boeing 777s, and leases and returns of others.

Despite the smaller fleet, KQ flew 1.1 million passengers in the quarter, almost 5% more than last year with a cabin factor of 72% up from 68%. The passengers were on routes in Europe (102,749), Middle East & Far East (138,700), Africa (530,842) and within Kenya (347,136)

KQ increased the number of flights in Africa, while reducing capacity on others as a result of  using Boeing 787s and Boeing 737s on the Middle East, China and India routes that were previously served with Boeing 777s. They added routes to Cape Town, as well as others on the Nairobi-Entebbe-Bangui and Nairobi-Doula- Bangui but suspended flights to Gaborone and Abuja.

KQ’s financial year-end is on March 31, 2017 and they are currently celebrating their 40th anniversary with a 40% fare sale on all routes, and with special fares in business class, marking their beginning in the year 1977. They also just announced an interline cargo agreement with Qantas through which they target to fly 30 tonnes of flowers per month to Australia, as they explore shipping even more flowers to China and the Far East

Last week also saw Kenya Airways largest shareholder, the Government of Kenya, flex its muscle by canceling a third Emirates daily flight into Nairobi that was to begin in June 2017. Emirates currently flies Boeing 777s twice daily between Nairobi and Dubai.

Kenya Airways marks 40 years with 40% fare sale

Kenya Airways (KQ) turns 40 today. It was incorporated on January 22, 1977, after the disbandment of East African Airways as a consequence of the collapse of the East African Community, and with some assets and staff of East African Airways was to be the national flag carrier of Kenya

The airline’s story can summed up in three phases: First, was a typical African state airline flying unprofitable routes to far-flung destinations, and with operational and management issues.

Then the early 1990’s saw a move to address the decline and a new board was formed, that was chaired by former Central Bank Governor Philip Ndegwa. It had a mandate to commercialize and privatize the airline. They hired Speedwing Consulting in February 1992 who appointed a new executive team that implemented an extensive restructuring involving fleet reduction, fare and route reviews, staff training and voluntary staff reduction.

This was followed in January 1996 by the sale of 26% to KLM  which was to see KQ grow as part of a global airline partnership. Kenya Airways was converted to a public company in March 1996 and its shares were listed on the Nairobi Stock Exchange in June 1996 in an over-subscribed IPO in which thousands of Kenyans bought shares. This reduced the government shareholding to 23%, and shares were later cross-listed in Uganda and Tanzania.

The third phase was the 2000’s decade when Kenya Airways embarked on a long expansion period under CEO Titus Naikuni, and there was a period where they greatly increased and modernized the fleet, and added almost a route every month, mainly to African capital cities. The expansion, however, came a time that the global and African airline space was becoming quite competitive at a time that KQ also faced new internal challenges. This was manifested in two years of successive record losses, strained network operations, and passenger relationships.
They airline turns 40 at a time when it has embarked on an extensive restructuring program called Operation Pride. KQ’s new chairman is celebrated former Safaricom CEO Michael Joseph who joined the board in September 2016, and who is leading the search for a new CEO. KQ has a leaner fleet of mainly new Boeing 787 Dreamliners and Embraer 190’s, staff and operations with a focus on partnerships and regaining profitability with the support of the Kenya Government.

For any airline, 40 years is a major milestone to reach, and even with the ongoing austerity moves, KQ is still celebrating the occasion with special fares for its passengers including:

  • 40% discount across its network for flights booked from January 22 to February 5, (the 1977 date after it commenced flights) for flights taken between January 22 to December 31, 2017.
  • $1,977 business class fares to Hong Kong, Paris, London, and Amsterdam.
  • Up to 50% off companion fares when one buys a business class ticket

KQ CEO Exits

On Thursday this week Kenya Airways (KQ) released a statement announcing that CEO, Mbuvi Ngunze, would leave the airline in the first quarter of 2017. Mbuvi will have been with KQ for five years, 3 as COO and 2 rocky years at CEO when he had to announce consecutive record financial losses.

Mbuvi was unanimously  selected by the KQ board and appointed in June 2014, but almost as soon as he took over in December 2014, the bad news started.

– (Unexpected events) KQ’s loss in the half year. Amid the arrival of a half-dozen new Boeing 787 Dreamliners and other aircraft and long-serving CEO Titus Naikuni stepping down there was one more shock from the airline in the form of a half-year loss of Kshs 10.45 billion ($116 million)

KQ CEO deckHe’s unfortunately taken the blame for the losses and for events that were in existence before he took over – mainly the ambitious decade-long Project Mawingu expansion that was left hanging by three almost simultaneous events in 2013 – the JKIA fire, Westgate attack in Nairobi and Ebola outbreak in West Africa – that effectively put a stop to ambitious plans to have millions of new passengers flying trough Nairobi. Coupled with that was the expansion of Emirates and other Gulf carriers across Africa that the board had not foreseen – and Emirates & Qatar Airways are said to generate more revenues from Africa  routes – than South African, Ethiopian, and Kenya Airways combined)

He undertook some painful decisions at the airline that were seen as unpopular – sale of assets (large idle Boeing 777 aircraft, and the Heathrow time slot) layoffs of pilot B777 pilots and other  staff reductions – all firefighting tactics as he also tried to secure funding as losses eroded the airline’s balance sheet of the airline amid ongoing probes by a senate committee into the losses at the airline and an ongoing audit of revenue loss and fraud at KQ.

Michael Joseph has been Chairman of the board for about a month, announced Mbuvi’s exit with the hint that the next CEO will likely not be a Kenyan.  Mbuvi will assist in the succession process, as the new CEO is expected to continue in the current turnaround plan, who goals in the short-term are still an improvement in liquidity and the reduction of the overall debt.