MCKINSEY PLAN OUTLINES KENYA AIRWAYS’ TURNAROUND
(Posted 16th November 2015)
Global consulting giant McKinsey’s proposals, how to turn the financial fortunes of Kenya Airways around, may hold the key for the rise of the airline’s share values, going by information received from Nairobi. A 24 point plan addresses a wide range of options how to save as much as 346 million US Dollars over the next two years, most crucial being the restructuring of the airline’s short and medium term debt. Sharper practice vis a vis fuel hedging if not dropping these contracts altogether too is high on that list as this line item has in the past contributed to the accumulated losses.
CEO Mbuvi Ngunze, during a meeting last week on the sidelines of the just ended Africa Travel Association’s 40th Annual Congress, had confirmed that major decisions were imminent and it is now confirmed that by end November the McKinsey plan will be progressively implemented. Mbuvi Ngunze, while not putting a time frame on the sale of the airline’s B777-200 fleet, did however confirm that negotiations were at an advanced stage and proceeds could by this correspondent’s best estimates reach between 150 and 200 million US Dollars, a fair price considering the present glut in the pre-owned large jet market.
Still causing major concerns are the fluctuations of the Kenya Shilling versus major currencies like the US Dollar, however an item beyond the airline’s control, as are continuously high interest rates in the domestic market, in part caused due to the Kenyan government’s high level of borrowing.
Many of the ATA delegates who had flown on Kenya Airways from London or Amsterdam to Nairobi were complimentary of the service levels, on the ground and in the air and in particular feedback from departing ATA members about the check in through the new Terminal 1A at Jomo Kenyatta International Airport gave the airline the thumbs up.
Projected additional savings and productivity increases, as outlined in the McKinsey report however will also depend on the goodwill of Kenya’s aviation unions. Those have in the past been seen as a major challenge towards sustaining and promoting a financial turnaround, unlike for one of KQ’s major competitors where militant unionism is literally unheard of and where staff cost are subsequently significantly lower. In particular has the Kenyan pilots union shown glaring examples of incompetence when they demanded that Kenya Airways’ low cost subsidiary JamboJet use ‘inhouse pilots’ for the operation of the two wetleased Bombardier Q400NextGen’s, an aircraft type for which none of KQ’s and Jambojet’s pilots holds a type rating.
As mentioned here in passing recently did the airline in a low key ceremony also receive the last two of their order of overall nine Boeing B787-9 Dreamliners and now expects the delivery of another Boeing B737-800NG with the latest cabin product – which includes Boeing’s SkyInterior outfitting – before the end of 2015.
The shareholder briefing on Thursday last week at the InterContinental Hotel outlined some of the measures which will be taken and it is expected that the key institutional shareholders, among them the Kenyan government and KLM, the Royal Dutch Airline, will support the proposals.
