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Society & Success

Hard landing for ex-KQ finance boss

Former KQ finance director Alex Mbugua. FILE PHOTO | DIANA NGILA | NMG
Former KQ finance director Alex Mbugua. FILE PHOTO | SALATON NJAU | NMG 

When former Kenya Airways #ticker:KQ finance director Alex Wainaina Mbugua drove his silver Prado into the airline’s Embakasi headquarters at 8:30am last Wednesday, he certainly knew he was as unwelcome as a priest is in a raunchy nightclub.

If the 53-year-old teetotaler had any doubts of this, the airline’s security guards wasted no time appraising him; he was blocked from accessing his office as ordered by the court the previous day.

Instead of keys to his office, from which he was in similar dramatic fashion ejected on January 19, 2016, Mbugua was handed a letter bearing instructions that he immediately proceed on leave for 21 days.

Mr Mbugua was drawing his unflappable confidence from a ruling by Employment and Labour Relations Judge Monica Mbaru who, after court proceedings spanning 20 months, concluded that KQ unlawfully sacked its finance director of eight years.

The judge ordered the national carrier to either reinstate him immediately, and pay him his backdated dues in 30 days, or wire the equivalent of 48 months basic pay to his bank account.

The first option would cost the broke airline about Sh66 million, based on Mr Mbugua’s gross monthly salary of Sh3 million. The alternative racks up to a whopping bill of Sh144 million.

“I was taken aback by the move to send me on leave. I was told that the CEO, who was to receive me according to the court order, was not in the country. The person holding brief for him was also said to be unavailable,” said Mr Mbugua.

“I was basically told to go on leave as the airline reviews the judgment and their next course of action. My understanding is that this (forced leave) directive is contrary to the court’s orders. However, my lawyers are reviewing it.”

In sacking Mr Mbugua, KQ accused him of intentionally skipping an urgent performance review meeting, which was seen as insubordination.

The airline also claimed he was an underperformer, an accusation Mr Mbugua’s lawyers pushed back on in court, arguing that he had received several accolades for his job.

Mr Mbugua’s sharp critics in the public sphere, some of whom interact with this writer on his social media pages, hold a similar no-love-lost view as KQ; he is one of managers responsible for plunging the airline into a financial rut.

Many of those who accuse him of miscarriage of duty will ordinarily and quickly point out two things – the aborted Project Mawingu and the costly fuel hedging programme.

Project Mawingu, the ambitious expansionary plan was supposed to grow KQ’s destinations from the then 57 in 2011 to 115 in a decade. This was to be supported by a beefing up of its fleet from 34 to 119.

Mr Mbugua, who joined KQ in July 2008, chaired the strategic planning committee that developed the project, and presided over the capital raising for the plan which needed a whopping $3.65 billion in the first five years.

Implosion

The debt-financed fleet modernisation saddled the airline with huge and expensive liabilities, mostly from commercial banks.

Project Mawingu spectacularly imploded, leaving the airline with excess capacity and auto-regenerating excuses from the managers who worked on the project, many of whom have since exited.

Huge fuel hedging and forex losses, a runaway wage bill, terrorism attacks and increased competition from other carriers are all said to have colluded to swat the project off course.

Expectedly, Mr Mbugua, who says he has recently rededicated his life to God, has his own set of explanations.

“When I joined KQ, 13 aircraft purchase orders had been made. Nine were firm and four optional. Surprisingly, we did not have a network plan for the inbound aircraft. I was tasked with helping develop one,” he told Business Daily on Thursday.

“Now, the plan was not bad. However, the commercial team failed us because they were unable to find passengers for the planes. Occurrences like Ebola in West Africa affected everybody so that should not be used as an excuse.”

Fuel hedging

Another indictment that Mr Mbugua just cannot seem to shake off, but not for want of trying, is the impact that fuel hedging had on KQ’s finances.

Several times a year, he would get on a podium and explain why it was prudent for the airline to continue using this contractual tool to protect itself from the price volatility of fuel price, KQ’s single largest expense.

KQ reported a Sh26.2 billion net loss for the year ended March 2016 (three months after Mr Mbugua’s exit) compared to Sh25.7 billion after-tax loss it posted the previous year.

This record-breaking corporate Kenya loss was mainly the result of a Sh5.1 billion loss KQ booked from fuel hedging.  Soon thereafter, former chief executive Mbuvi Ngunze said: “My position is that we have put on hold new hedging contracts.”

Despite being KQ’s chief finance advisor through tumultuous fuel hedging periods, Mr Mbugua maintains that it was the right decision for the airline.

“Hedging is a risk management tool that all responsible airlines make use of,” the avid golfer explained. “When we made losses, big airlines like KLM and Air France suffered too. I still believe hedging was the safer alternative.”

The son of Reverend Judy Mbugua of Ladies Home Care Fellowship holds two Masters of Business Administration (MBA) degrees.

One of them is on international finance from Wits Business School in South Africa acquired in 2001 and another on general finance from New York University four years ago.

Prior to joining KQ in July 2008, he was CFO at Johannesburg-based Africa Open Pit Mines AngloGold Ashanti, a global gold producer operating in 11 countries and listed on five bourses, including the New York Stock Exchange.

But what does the father of four really want from the ailing national carrier? His job back? The hefty pay off?

“This matter has been extremely straining on my family, my being and on my finances. I do not want a long drawn battle with KQ in court. I simply want closure one way or another,” he told said.

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