Two weeks ago, I gave commentaries to a story published on this paper about KQ’s overheads remaining high despite the company bringing in a CEO with an impressive resume of being a turn-around manager.
The story was simply screening the CEO’s restructuring strategy, if it is working, more specifically cost-cutting, which is useful information to shareholders and taxpayers who bear heavy brunt of bailing out the company every year.
My analysis simple. KQ has enjoyed revenue growth but still reports huge losses, it surely means the problem is on the overheads side. What followed was a scathing, arrogant and condescending email response from a Managing Partner of some nondescript PR firm furious at my comments, speaking bald financial ignorance.
What stuck with me was the question, what exactly is understood as public relations in Kenya? Going around unnecessarily antagonizing people who don’t praise your client?
More interestingly, KQ’s head of PR was also copied in the email. If it was KQ interests being represented here, then it answers a lot of questions, the company has the highest affinity to professional incompetency and malaise of snake oil service providers.
PR is defined as service of creating, improving and managing relationships in the best interest of the organization. In this case, the PR strategy was to open a war front. Silencing critics is not a new line of defense from KQ though, not long ago the chairman was irritated berating Kenyans in an op-ed why they have invested interested in KQ-JKIA take-over proposal, oblivious to the facts that JKIA is a public asset and its Kenyan taxpayers who keep bailing them out of their perennial losses, mismanagement and inefficiency.
More callous was the PR company that it didn’t even bother to mind the image of its client to shareholders. It never occurred to them to factor in the risk of whether I may be a KQ shareholder. The email was nothing short of throwing up on the shoes of shareholders who have gone for years without receiving any dividends.
Now let us delve into their arguments, first issue was that the analysis on the performance of the airline was narrowed down to one period when it should be from when KQ made the historic 25 billion loss in 2015. The context of the story is very clear and doesn’t need explanation, its screening the performance of the CEO who is completing his second year of his three-year contract as a turnaround manager.
Next issue is whether KQ’s cost has been rising, and nothing can be further from the truth. The new CEO joined in June 2017, so I looked at the numbers from thereon. From KQ’s financial statements, Fuel costs in Dec 17 was Sh19 billion then moved up to Sh25 billion in March 2018 and Sh33 billion in Dec 2018. Next item which is overheads stood at Sh15.5 billion in Dec 2017 then moved up to 21.9 billion in March 2018 then dropped slightly to Sh20.9 billion in Dec 2018. Next is fleet ownership cost which stood at Sh12.5 billion in Dec 2017, then increased to Sh15.6 billion in March 2018 and increased further to Sh18.9 billion in Dec 2018. So, the verdict about the CEO’s two-year reign at the helm of KQ is out there, it is not my creation.
Third issue was that KQ is also affected by macro-economic factors like all other business in the country which explains the costs. It’s clear the PR company doesn’t even understand its client. KQ is not a Wilson Airport-based airline operating in the local market, it is an international airline operating in the global market. The only issue that can be related to the local economy is fuel cost and that can’t qualify as a macro-economic factor.
Taxpayers may bail out KQ’s financial losses, but, unfortunately, not incompetence and snake oil service provision.
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