Category Archives: Kenya Airways

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)

He’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 through 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.

situs gacor

rtp slot

slot gacor

New Chairman at KQ

Ahead of the release of their half-year results, Kenya Airways has announced a board change with former Safaricom CEO, Michael Joseph being elected as the new chairman of the airline. He replaced Dennis Awori who had been on the board and chairman, for just over a year since the 2015 AGM.

Joseph was a surprise addition to the Kenya Airways board at the AGM on which he did not event attend. He got more votes than the government officials, indicating he had the support of the Kenya government, KLM, and also the shareholders in attendance (the IMF seems not to vote).

This is a tough time for the airline on the back of two years of staggering losses. Awori joined the board in the middle of this, and just as the airline embarked on a turnaround plan called Operation Pride. The results of it are yet to be fully realized, but already there have been drastic decisions made with the paring down of the airline’s (large idle 777 fleet), sale of the Heathrow slot, securing new finance from the Kenya government and Afrexim bank. Underlying it all is a repudiation of the very ambitious ‘Project Mawingu’ that has a massive investment in the airlines fleet to support a network growth to new destinations. It anticipated massive growth in numbers through Nairobi but that did not happen as the planners appear not to have anticipated the growing expansion of Gulf carriers into Africa where they are now believed to account for 80% of the traffic.

In adding Michael Joseph it the board hopes he can repeat the success at Safaricom and already the move has been cheered by investors with the share price rising to its highest point in over a year, since his addition to the board.

chart & data from rich.co.ke

Awori has a stellar CV as a director in corporate Kenya where he’s also the chairman of Toyota Kenya and Bank of Africa, and on the board of EA Cables, Vision 2030 and KEPSA – but he was the wrong man at the wrong time. These are turbulent times at KQ that is undergoing massive internal change that requires effective and reassuring communication to the investors, staff, and the public. Already Joseph appeared at the airline pilots union and appeared to have persuaded them to shelve their potentially-crippling strike plan.

situs gacor

rtp slot

slot gacor

Reading the Tea leaves at Centum, Kenya Airways, Safaricom – Part II

Follow up from two years ago

Three companies that had their year-end in March 2016 have just published their annual reports which are now found on their individual websites. On Thursday both Centum and Kenya Airways boards will face their shareholders at the annual general meetings (AGM’s). Centum is ending a 9 year dividend drought, and Kenya Airways which had another a record-breaking loss, now believes the worst os now behind them. Meanwhile Safaricom will create 6 ‘mini-Safaricoms’ that operate in six Kenya regions and create more segment products like Blaze.

Centum:

Has a (massive 192) page annual report (up from 160 pages), and the company has 37,325 shareholders.
Will pay Kshs 665 million in dividend (1/= per share) ending a long dividend drought (since 2009)
Significant joint ventures are Amu Power (51%) and Two Rivers Lifestyle Center (50% – following a partial disposal). Old Mutual advanced Kshs 5.7 billion to Two Rivers with the debt convertible to 40% in the equity of Two Rivers, with shareholders loans previously held by AVIC and ICDC offset against the consideration. Further developments at Two Rivers include luxury apartments, a five-star hotel and residences, a healthcare facility and additional structured parking. Property owners who have purchased plots at Two Rivers include South Africa’s City Lodge Hotel group who are establishing a three star hotel; and Victoria Bank, who are constructing an office block.
The completion of the transaction on disposal of interest in Two Rivers and the acquisition of additional interest in Kilele, Sidian Bank and Almasi resulted in a net gain on disposal recorded in equity of Kshs 2.5 billion.
The half-year report will be available online to shareholders who register.
NAS, where they own 15% will continue diversifying its income streams by launching two Burger King restaurant franchise outlets in Kenya.
Will enter the healthcare business with a significant investment this year
Centrum plans to build 20 schools across Africa in the next three to five years, as part of a tripartite consortium with SABIS and Investbridge Capital. The consortium has acquired a suitable site along Kiambu Road that will host the first SABIS school in Sub-Saharan Africa, offering both 8-4-4 and K-12 education curricula with a capacity of up to 1,700 students.
In agri-business, Centum incorporated Greenblade Growers and acquired a 120 acre farm in Ol Kalou that will be used for value addition and will have a capacity to process 10 tonnes of fresh produce per day, to key export markets of Netherlands and later the UK.
Energy: to date, the company has invested Kshs 3.1 billion in the development of two landmark projects – Amu Power and Akiira One Geothermal.
At the AGM, Centum Chairman James Muguiyi, retires after 13 years and also the Principal Secretary – Ministry of Industry, Trade and Cooperatives, (representing the Kenya government) will retire from the board and not seek re-election.
Shareholders will be asked to approve the incorporation of Zohari Leasing, Rea Power Company, Le Marina (Uganda) and Two Rivers Development Phase Two. Also that the acquisition of 100% shares of Vipingo Estates and an additional 29% of Longhorn Publishers be ratified (they paid Kshs 393 million for the new shares).
Shareholders will also approve a name change from Centum Investment Ltd. to Centum Investment PLC.
Shareholders will approve an indemnity of the company directors .. against all relevant loss including any liability incurred by him (her) in defending any civil or criminal proceedings.. the directors may decide to purchase and maintain insurance, at the expense of the company.

Kenya Airways (KQ)

The report is 149 pages (up from 130 pages) and KQ has 78,577 shareholders (a slight increase as their share price has dipped)
The Group operates domestic flights and flies to 53 destinations in Africa, Middle East, Asia and Europe.
After their 31 March 2016 year-end, they received Kshs 10 billion from the Government of Kenya, (being the second and final tranche of the KShs 20 billion (US$ 200 million) bridge financing that has been on-lend from African Export–Import Bank (Afreximbank), and they sub-leased two Boeing 787 & three Boeing 777-300 aircraft as part of the turnaround initiatives in order to improve its liquidity position.
JamboJet tax losses stood at Kshs 856 million, and Kenyan income tax laws allow for carry forward of tax losses for a maximum period of 10 years.
Short term facilities were drawn down from Equity Bank, Jamii Bora Bank, Kenya Commercial Bank, Commercial Bank of Africa, I & M Bank, Chase bank, National Bank of Kenya, Diamond Trust Bank, Co-operative Bank, NIC bank and Eco bank. During the year, the airline negotiated for extended repayment periods for all short-term loans ranging from 4 – 7 years except for Kenya Commercial bank. The Government of Kenya Loan is at 10.20% far much more than previous financing that was at 4-7%. Citi JP Morgan Kshs 78 billion is at 1.5% , Afrexim Bank 23 billion is at 4%, while other short-term Kshs 22 billion is at 9%
In addition to the Kenya government, KLM, and IFC, top 10 shareholders now include Mike Maina Kamau, Vijay Kumar Ratilal Shah, Gulamali Ismail and Galot International.
They implemented a business class upgrade system in January 2016, under which economy class passengers can bid & buy upgrades to fly on business class.
A total of 63 bird strikes were reported in the year (down from 77 last year).

Safaricom

The report is 172 pages (up from 136 pages) and the company has 600,000 shareholders (down from 660,000).
At the AGM a few weeks ago, shareholders approved payment of a dividend for Kshs 0.76 per share for 2016 and also a special bonus dividend of Kshs 0.68 per share.
According to a True Value report (they commissioned it, and it was done by KPMG), the total value the company contributed to Kenyan society in FY15 was Kshs 315 billion and they sustained over 682,000 jobs.
Bonga points totaling Kshs 3.2 billion are a liability to be converted to revenue as customers utilize their points
Lent Kshs 500 million to Safaricom money transfer services, a subsidiary that derives revenue from international money transfer services.
The license fee for M-pesa dropped from 10% to 5% from August 2015.
Donated Kshs 414 million to the Safaricom foundation
Spent Kshs 9.3 billion on the National Police Service communication project that’s now 92% complete.
They now require all new business partners to sign up to the “code of ethics for businesses in Kenya” during the on boarding process, and 269 companies have signed this.
They were fined Kshs 157 million by the Communications Authority of Kenya for not complying with its quality of service thresholds.

situs gacor

rtp slot

slot gacor

KQ Operation Pride

What is Operation Pride? Kenya Airways (KQ) has just released its financial results for 2016. It’s been another loss-making year, and it’s clear that major changes will have to be made. Internally at KQ, they have Operation Pride, launched in October last year but, which started in March this year, and which KQ CEO, Mbuvi Ngunze, said aims to:

Close the profit gap (and get the airline to a 5% after-tax return).
Revising their business model to focus on Africa
Achieving Financial stability.

Item 3 is really about the shareholders (which includes the Government of Kenya – as a shareholder and regulator, and KLM) making balance sheet, debt and equity decisions. KQ has already secured $200 million through an on-lending agreement with the Kenya Government, and got the first $100 million in September 2015, and the rest of it this month – in July 2016.

And while the move to layoff some pilots and other staff (once other discussions with the Court and the unions are resolved), Operation Pride is not about jobs. It also more than cutting on costs without compromising quality and waste without reducing service.

Operation Pride started out as 460 initiatives that mainly came from suggestions from staff, consultants and stakeholders to improve the business. KQ staff will champion these as they are implemented over the next 18 months, and expected to generate about $200 million. About 40% of the impact will be from cutting costs and about 60% will be from growing revenue at the airline.

KQ CEO deck

After the 2016 results announcement this week, the Kenya Airways team showed their guests some examples of the 134 ongoing processes that they have started on. Most are intended to generate recurring savings, but some of them are one-time initiatives have already borne fruit, according to management, including:

Removal of 7 large aircraft will this will reduce KQ fleet costs by about $8 million per month. They were largely idle, and some have been sold, and others leased (3 777-300’s to Turkish) and (2 787’s to Oman). KQ is still able to serve all their existing routes (with about 60 weekly flights outside Africa) with the smaller fleet of 36 active aircraft.
The Heathrow deal in which they combined and sold two different time slots in conjunction with Air France raised a record amount. They had previously served London with night flights, but which meant a plane sat idle the whole day in London. Now they only need one aircraft and lease a slot from KLM, which means an (almost) immediate turnaround.

On the Revenue side:

Improved incentives to agents, who still generate 70-80% of the ticket sales.
Targeting corporate customers.
Adjusting flight times: E.g between Lusaka and Dubai, they can fly passengers at an attractive price and the total journey is just now over one hour longer, even with a stop-over in Nairobi, than the direct Emirates flight.
New routes in Africa, the Middle East, and China through new code-sharing partnerships (category one status for JKIA will also mean that they will be able book tickets to the US for flights on partner airlines). This is essentially a redesign of Project Mawingu a decade ago in which KQ set out to fly many new routes by themselves.
(A system that can?) React to try to match different over 1,000 ticket prices combinations every day.

On the Expense side:

The 787’s bring lower operating costs, than the released 777’s and lower maintenance costs than the retired 767’s.
Demo of food leftover after a typical KQ flight.
Use new hotels in Nairobi that offer good services and buying packaged deals from overseas hotels.
Re-negotiating handling contracts as a result of smaller aircraft.
Revising inflight meal service – serving lighter meals to reduce waste, and removing beverages that were not popular.
Controlling and reducing staff travel.

situs gacor

rtp slot

slot gacor

Kenya Airways 2016 Results

Kenya Airways announced their results this morning at their Pride Centre in Nairobi. The CEO – Mbuvi Ngunze , Finance director and management all referred to the airline being stable after a turbulent stall.

They flew 4.2 million passengers (up from 4.1M the year before) and – with about 11,500 passengers daily and 158 tons of cargo per day, they had a 68% cabin factor, which is decent for African routes.
With fewer aircraft – 36 (compared to 43 before) they operated more frequencies to the same 54 destinations.
Turnover went up 5% to Kshs 116 billion and management says they broke even on operations in 2016 compared to an 11 billion loss last year.
They reported a gross profit of Kshs 48 billion and operating loss as at March 2016 of Kshs 4.1 billion that’s 75% less than the Kshs 16.3 billion of the year before.

Fleet ownership costs were Kshs 29 billion – up from the year before as the full cost of the arrival of the 787’s were felt. They also had to make provision for the aircraft that they are leasing out to other airlines.
Net finance cost was Kshs – 7 billion, up from Kshs from 4.5 billion. They had to pay more interest on their borrowing some of which were short-term, and in 98% of which are in dollars (taken when the US dollar was Kshs 75, but which now exchanges at Kshs 101).
Foreign exchange losses were Kshs 10.8 billion up from 1 billion, and Mbuvi said that, if the Kenya shilling did not depreciate, the loss would have been Kshs 10 billion smaller. They also had to book losses from countries like South Sudan which devalued its pound from 3 to 31 to the dollar.
Fuel hedges resulted in a loss of Kshs 5 billion.
Overall loss before tax of 26 billion, and the valance sheet went down from Kshs 141 to 128 billion. For shareholders, the reserves are now Kshs -51 billion.

Q&A

Ethiopia: What is Ethiopian doing right that KQ isn’t? KQ had some advantages, ET has some advantages. They operate a different network – we focus on Africa, they focus outside, and the frequencies into Addis and the frequency into Nairobi are different.

US flights: While the government is excited about category one upgrade of JKIA, Mbuvi said that their priority is code sharing with a US partner, more than doing direct flights themselves.

Currency reparation: Globally, airlines have $4 billion in non-repatriated currencies (with $400 million in Nigeria) and KQ faces challenges in Sudan, Nigeria, and Angola

Other: The last good year for tourism in Kenya was 2011, when there were 1.8 million tourist arrivals (it was 1.3 million last year) and 2017 will be an election year for Kenya. They are yet to assess Brexit impact but commodity slowdown and currency crunch has seen a slow down in the African routes they operate in.

They said the Government of Kenya and KLM, remain supportive of the company’s turnaround efforts which are embodied in Operation Pride, and this comes in a year in which they were voted the leading airline in Africa and leading airline for business class.

situs gacor

rtp slot

slot gacor

Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: Kenya Airways

KQ CEO Exits

New Chairman at KQ

Reading the Tea leaves at Centum, Kenya Airways, Safaricom – Part II

KQ Operation Pride

Kenya Airways 2016 Results