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Incompetent management to blame for KQ's financial woes

03 December 2015, 11:19 Samuel Kisika

Nairobi - A Senate inquiry report into Kenya Airways (KQ) financial woes has cited incompetent board of management as the cause of the airline's huge losses.

The report tabled in Senate by the Select committee that had been inquiring into KQ's affairs chaired by Senator Anyang Nyong'o (Kisumu) also revealed that the airline's CEO, Mbuvi Ngunze did not qualify for the position of Chief Operating Officer as per the company's provisions despite the board's approval of his recruitment.

The committee's report, therefore, proposes reconstitution of the Board of Management by the major shareholders, which includes restructuring and putting into place a management team with sufficient skills and experience in the aviation industry, and with an ability to turn around and build the company.

It also recommends that the hiring of a new marketing director with proven international experience to turn around its ticketing system and ensure proper accounting of revenue from market sales.

“Infusion of capital can only be made upon meeting the conditions stated above. The committee does not recommend any bailout that does not take into full account the above conditions,” reads part of the report.

Read Also: Kenya Airways starts turnaround plan as H1 losses narrow

Since the Nyong'o-led inquiry committee failed to ascertain how the airline incurred billions of shillings loss, it asked the Auditor General, Edward Ouko to audit KQ's accounts to ensure prudent use of public funds injected into it by the government.

The committee further recommends reconstitution of KQ's Board of Directors on grounds that the current management team is over-represented to undermine the Board’s advisory role.

The committee faulted the board for using its discretion to waive the requirement for 8-10 years’ experience which allowed the current Group Director and Chief Executive Officer to be recruited as Chief Operating Officer for three years before being elevated to the current position.

However, committee members argued in their recommendations that given the importance of KQ to the Kenyan economy, the shareholders should inject new capital into the airline to facilitate its turnaround.

Overpricing of tickets was also cited as one reason that has led to loss of customers to competitors, making profits elusive.

The committee outlined three options as the road to recovery for KQ, if it has to remove itself form the current fiscal dilemma, beginning with the recapitalization through a rights issue or bringing on board additional stakeholders or sale of the Government’s 29 percent share.

On the conduct of the board, the committee questioned: “How could the Board exercise discretion on a matter clearly laid down in a procedural document? The Board’s discretion was over stretched resulting in the employment of an unqualified person to a critical office assigned key responsibilities in the airline’s operations.”

The report also pointed out that the Board of Kenya Airways does not have the latitude to waive employment qualifications which form part of its own labour requirements.

“We are not persuaded that the Kenya Airways management understood the environment and market they were operating in so as to maintain a competitive edge," observed the report.

The report suggested that whenever it is necessary to hire foreign workers, Kenya Airways should negotiate with Governments whose nationals are hired to work for KQ. Further, KQ should seek exchange programmes from those airlines to benefit from shared experiences and passengers access.

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