KQ finance chief bows out amid financial storm

Mr Alex Mbugua helped steer firms to success, but at KQ, a turbulent financial ‘flight’ proved too tough. PHOTO | FILE
Mr Alex Mbugua helped steer firms to success, but at KQ, a turbulent financial ‘flight’ proved too tough. PHOTO | FILE 

When Kenya Airways’ ambitious expansion plan dubbed Project Mawingu took to the skies in 2011, Alex Wainaina Mbugua was the “first officer” while Titus Naikuni was at his left hand side —the “captain” of the “aircraft”.

The plane was to usher the airline into a thriving era by growing the number of destinations from the then 57 to 115 in a decade, supported by a beefing up of its fleet from 34 to 119.

However, the plan flew into turbulence soon after take-off, rattling its Business class passengers (KLM and the Kenya government) and regular shareholders riding in Economy.

Mr Mbugua, Kenya Airways’ (KQ) chief financial officer at the time, chaired the strategic planning committee that developed the project, and presided over the capital raising for the project which needed a whopping $3.65 billion in the first five years.

The expensive debt-financed fleet modernisation plan has since straddled the airline with huge liabilities, mostly from banks, that as of September stood at Sh167 billion.

Depressed demand to destinations like Europe (partly due to insecurity and the resultant travel advisories), saw the airline execute a route rationalisation plan where it pulled out of unprofitable routes.

This retraction chipped away at the grand plan of launching three routes per year and an ultimate goal of operating a sizeable fleet that included 32 Boeing 787s by 2021.

Huge fuel hedging and forex losses, a runaway wage bill, terrorism attacks and increased competition from other carriers all colluded to further unnerve Project Mawingu.

The 20-page PowerPoint presentation of the plan, which KQ’s management had pitched as “robust and based on sound business projections” was proving a lot harder to implement outside the boardroom.

“Originally, when we were putting Mawingu together, the expected uptake from a passenger perspective was much better than reality has turned out to be,” Mr Mbugua told a Senate committee probing the airline in August 2015.

The beating showed: KQ’s full-year net profit halved to Sh1.7 billion in the year to March 2012, followed by a Sh7.86 billion loss in 2013 and a Sh3.38 billion loss the year after that.

Former KQ chief executive Mr Naikuni parachuted off the plane in November 2014, preferring the more predictable life of rearing cattle to the dial-filled cockpit.

In the half year to September, the national carrier reported a Sh11.95 billion net loss and that its negative equity position now stands at a staggering Sh33.9 billion.

A recent sale of some aircraft lowered KQ’s operating costs by Sh8.3 billion to Sh58.9 billion and improved its operating loss position to Sh2.18 billion from the previous year’s Sh10.5 billion.

At a November 12 investor briefing to announce these earnings, Mr Mbugua was still exuding optimism despite having stood at the same podium for three years in a row to announce dismal results.

That was his last briefing as the airline’s CFO. On January 19, it was his turn to exit the cockpit after eight years.

The airline’s board announced his departure in a statement introducing his replacement Dick Murianki, the former general manager for its cargo business, albeit in acting capacity.

Mr Mbugua’s replacement followed a push by the Treasury that some top managers at the airline have to shoulder blame for KQ’s decline and exit the firm if ongoing bailout discussions are to be fruitful.

The State owns a 29.8 per cent stake in the carrier while Netherlands-based KLM has a 26.7 per cent stake, making them the two top shareholders.

Looking at his resume, it is easy to conclude that the 51-year-old had the chops for the job. 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.

In October 2012, he graduated from Havard Business School’s Advanced Management Programme which promises to “empower executives with the expertise to drive performance across domains, industries, and borders.”

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.

While there, the certified public accountant is said to have successfully realigned the firm’s operational strategy, including reducing costs significantly, a record that probably endeared him to his recruiters.

Between 2000 and 2003, he served as the chief executive of Combined Systems Group, a subsidiary of PricewaterhouseCoppers in Johannesburg and prior to that he was the finance and administration director at Bain Hogg Insurance Brokers.

Mr Mbugua, who holds 25,426 KQ shares, was CFO for Express Kenya between 1992 and 1997. His first taste of the aviation world was in 1990 when he worked as a financial consultant for the International Air Transport Association for two years, soon after leaving audit firm KPMG where he was an audit consultant.

His love for numbers was easy to pick up, especially during investor briefings. He would dissect the company’s financials, as gloomy as they have been lately, in an effortless manner which only somebody who is truly immersed in them could muster.

People who have worked with the man, who has an insatiable liking of Coke Zero, say he somehow was able to explain “tough concepts such as fuel hedging” to laymen.

Some described him as self-confident, bordering on arrogant, while others say he was friendly, giving them a listening ear when they consulted him on matters economics.

To business journalists, Mr Mbugua’s contact was of purely ceremonial value in one’s phone book.

He rarely picked up calls from the media and, even when he surprisingly did, he would quickly insist that one seeks information through KQ’s corporate communications team.

Attempts by the Business Daily to talk to him on Thursday about this article yielded similar results. He picked up his phone and, after pleasantries, summarily stated that he had “nothing to say at this point”, promising to call back when he was ready to open up about his departure.

However, before ending the call, he squeezed in a quick statement that the media had erroneously reported that he had been sacked but declined to clarify what actually transpired.

He has left KQ at a time when the carrier is implementing a turnaround plan with the help of US consultancy firm McKinsey.

The team he has left behind, led by CEO Mbuvi Ngunze, are optimistic that restructuring will help the firm finally land on profitable territory.