Transport minister James Macharia puts KQ bosses on notice

Transport secretary James Macharia on Wednesday promised tough action against top Kenya Airways officials named by consulting firm Deloitte as being responsible for the airline’s troubles.

Mr Macharia said a Cabinet sub-committee, comprising his Industrialisation and Treasury counterparts, the Attorney-General and himself, is studying the report to determine who to investigate, reprimand, sack or prosecute.

“After three weeks or so, we shall begin taking action based on the findings and recommendations of the audit report,” he said.

“Anybody found culpable shall be held to account. Based on the nature of the findings, we shall take appropriate actions. We could see some people leave the company while others could end up in court.”

The report mentions tens of individuals -- current and former KQ employees and third parties (including companies) -- deemed to have aided the airline’s descent into a financial abyss, either through negligence, abuse of power or theft.

Deloitte’s historical investigation interrogated several KQ units including ticketing, procurement, aircraft purchase and maintenance, the airline’s handling of the repatriation of offshore blocked funds as well as foreign exchange accounts.

Some of the well-known individuals named in the over 1,000 page report include former KQ chief executive Titus Naikuni and his successor, Mbuvi Ngunze.

Mr Naikuni led the management team that Deloitte says could have used “undue pressure” to aid the purchase of two Boeing aircraft from KLM Dutch Airlines between 2004 and 2005 for Sh2 billion. The planes were later sold for Sh210 million.

The auditors found a paper trail indicating that the former CEO was to receive a “charity credit” of $35,000 while double that amount was to be made available to KQ.

READ: KQ flying into fresh storm as pilots issue strike notice

Deloitte says it did not investigate these two payments since they were “not in scope” but recommended that the transactions be investigated further to determine how the money was used.

“The email trail further revealed that on December 15, 2004, Mr Chris Smyth (the KQ finance director at the time) informed Mr Naikuni that the charity credit of $35 000 was available for Mr Naikuni to spend,” the report says.

Deloitte has also recommended that disciplinary action be taken against Mr Ngunze for failing “to exercise due care and diligence” when he approved an account opening letter with Dubai Bank.”

Mr Mbuvi, who took over from Mr Naikuni in November 2014, was found to have approved a bank guarantee of Sh665.9 million, which was Sh155.9 million above the amount approved by the board.

“The losses to KQ emanating from Mr Ngunze’s actions were; $350,000 being fees paid to Dubai Bank that resulted in a loss of $140,000 being excess payment,” the report says.

The airline’s head of marketing is named as having been negligent in issuing purchase orders after receipt of services and without following proper procurement procedures.

This irregularity happened during two Safari Sevens tournaments in September 2014 and October 2015.

Last April, Kenya Airways pilots went on strike for a day demanding comprehensive management changes at KQ, saying the team was responsible for persistent losses at the public listed company.

The industrial action forced the cancellation about 25 flights and only ended when negotiations with Mr Macharia saw several managers either asked to exit the company or got suspended.

READ: Pilots union renews call for sacking of KQ management

To calm down the pilots,Mr Macharia had at the time promised that more heads would roll once Deloitte’s forensic report was out.
The pilots have now renewed their demand to have more KQ managers leave the company.

The pilots, through the Kenya Airline Pilots Association (Kalpa), accuse the KQ top brass of mismanaging the public-listed firm, which posted a record net loss of Sh26.2 billion for the year ended March 2016.

The union on Tuesday issued a seven-day strike notice calling for the resignation of the duo, failure to which they promise to ground KQ’s approximately 36 aircraft.

Mr Macharia says the government has opened talks with the pilots following their notice, saying he is “hopeful that the ongoing engagements will have positive results in the short-term.”