MEDIUM TERM TURNAROUND WITHIN GRASP NOW AS ‘OPERATION PRIDE‘ GAINS MOMENTUM
(Posted 06th October 2016)
Following a flurry of anti national airline social media comments, and outright lies being peddled by one daily published in Nairobi over the extend of a flight delay, where both flight numbers and affected passenger numbers, incidentally of a Jambojet flight, were wildly and deliberately inflated to fuel anti KQ sentiments, has Board Chaiman Ambassador Denis Awori a few hours ago issued the following statement, to put things in perspective:
Kenya Airways Statement
KENYA AIRWAYS·WEDNESDAY, OCTOBER 5, 2016
Operation Pride
Our ambitious turnaround plan, Operation Pride, is consistently gaining traction to ensure the national carrier returns to profitability despite sentiments in the public domain to the contrary. Operation Pride is being implemented according to plan and already yielding positive results, which will be visible in the half-year report. As at the year ended 31st March 2016, the Operating result improved by 75%. By the end of September, Operation Pride had already led to the implementation of 40% of the targeted recurring cash impact, and 36% of the one-time cash impact. Some of the actions already implemented include the sale of the London slot to raise cash for operations as well as retiming of the flights from London for greater efficiency; the Revenue Management transformation and many improvements in procurement spend. The sale and sublease of aircraft has resulted in savings of over $7 Million, a month, from July 2016. As would be expected during a program of such importance, we run a transparent and competitive process to retain the best external advisors to support us in this turnaround. We needed to make sure that the program was soundly executed and can assure all stakeholders it is. The turnaround strategy is focused on three main priorities: · An operational turnaround to close the gap to profitability of US$200 Million · A shift in the company’s current strategy and business model · A financial optimisation to secure the short and long term financial structure of the business On the financing front, Kenya Airways raised $200 million short term funding with the support of the Government of Kenya to improve its liquidity and allow it to enter into the longer-term capital optimisation involving negotiations with different financial stakeholders to recover its financial position. The capital optimization process is of necessity a process involving a number of institutions and will take time. We are however confident that it will achieve its intended objective of improving the liquidity profile of the company.
Forensic Report
The Board of Directors of Kenya Airways has received the draft reports relating to the forensic audit that it commissioned in February this year. It is unfortunate that there has been a leak of these draft reports that are being commented on in the public domain, whereas they have not been completely interrogated and finalized by the Board. The audit was aimed at supporting the improvement of systems, processes and activities in order to make sure that as we formulated and implemented the turnaround strategy, we had full sight of all the issues the airline had faced and ensured any gaps were identified and plugged conclusively so that our turnaround is bolstered and sustainable. As part of the forensic investigation, Deloitte reviewed the operations, systems and internal controls of the airline, initially over the last five (5) years, but longer in some cases. The timing of the audit was further extended to allow for additional work in areas of concern, and for a more thorough evaluation of information requiring deeper analysis due to its voluminous nature, and the number of work streams that were under review. The areas covered in the audit included the following – Repatriation of funds and treasury management, Revenue Management, aircraft maintenance process, procurement of Jet Fuel, the procure to pay process in respect of specific procurement categories, procurement of new aircraft, financial services and the use of special purpose vehicles, the disposal of specific assets, excess baggage billing and cargo business in the main. In the course of the investigation, cases of fraudulent activity have come to light that could have caused losses to the airline over a period of time. Based on the above, the Board has considered and taken necessary action at various levels including strengthening of processes and controls, disciplinary action, termination of staff found culpable and launching further investigations which may lead to criminal and civil prosecution in some instances. The internal actions have and will be undertaken within the existing company disciplinary procedures. The Board also recognises that in the intervening period as the review covered the last five years, a significant number of changes have taken place, which have strengthened the control environment, but opportunities still exist to do more. Considering the sensitivity of potential prosecutions and the attendant criminal liability as may be established, the Board cannot at this point give specifics of persons and amounts involved as this may jeopardize the case files under preparation.
Conclusion
Beyond the financial impact, Operation Pride will also ensure the long-term sustainability of the turnaround by implementing a holistic change management effort, helping the company to improve internal capabilities through significant training in areas like revenue management and maintenance. In this context, Operation Pride is expected to allow the company to return to profitability within the next 12-18 months. The turnaround plan has full support of key shareholders including the Government of Kenya and KLM, and stakeholders. An update was presented at the Annual General Meeting (AGM) last week. As Kenya Airways we do have operational disruptions every so often, but remain focused on operational integrity, which is our customer promise. We operate over 150 flights per day and the On Time Performance (OTP) for week ending October 2, stood at 73 per cent for the entire network and 81 per cent for the domestic network. In this major transformational stage the airline needs to stay focused on its goals, which will take time to deliver and requires the consistent support of all stakeholders and the nation at large. We urge for patience as we continue ensuring Kenya Airways returns to profitability.
Amb. Dennis Awori
Chairman
Aviation observers and pundits, at least those levelheaded enough to understand the challenges of the industry which have afflicted many of the continent’s leading carriers, including South African Airways – they just got another 350 million US Dollar bailout – and Egypt Air, to name but two, have in discussions overnight agreed that the apparent need of unions to mouth off is displaced, given that they bear significant responsibility for the state of affairs at Kenya’s national airline.
Examples cited were both RwandAir and Ethiopian Airlines, where the level of dissent and acid name calling simply does not exist. Both Ethiopians and Rwandans – the latter airline has going by the words of CEO John Mirenge operated with losses over the past few years but expects to break even by 2018 – in contrast to Kenyans stand by their airline and unions do not rear their ugly heads with demands of unrealistic wages and working conditions. ‘Ethiopian is a good example for how that airline is run without constant interference by unions. Those constant critics of KQ need to understand the context under which ET operates and it is very similar to RwandAir. Check out their airline social media pages and it is immediately apparent how very different things are for those two airlines and why in the case of ET they succeed without the constant advice of armchair coaches‘ said one from JKIA on condition of anonymity while some Wilson based aviators in fact used descriptions for the anti KQ lobby not fit to be repeated here but showing the strength of sentiment how unions have overplayed their hands.
No doubt will union activists and militants again use this opportunity to discredit this correspondent for – as repeatedly alleged in the past but without any basis – being in the pocket of Kenya Airways’ management or worse, being a paid mouthpiece.
If at all there are paid or ideologically inclined mouthpieces, we know where to find those.
Enjoy your next flights with the ‘Pride of Africa‘ and begin to stand by your national airline, without which, among many other factors, tourism to Kenya would take an almost irreversible blow.
