Kenya Airways suspends CFO in executive falloutWednesday September 18 2019
Kenya Airways #ticker:KQ has suspended its chief financial officer in a development that look set to destabilise the executive suite of the national carrier struggling to recover from years of losses.
A director of the national carrier, who sought anonymity, told the Business Daily that the head of finance, Hellen Mathuka, was sent on compulsory leave last Friday after disagreeing on strategy with the carrier.
The moves come as the national carrier prepares for the premature departure of its chief executive Sebastian Mikosz at the end of December.
The Business Daily was unable to get an official comment over the executive fallout that comes in the middle of plans to nationalise the airline privatised 23 years ago.
On Tuesday, Mikosz said he had no comment for this story while KQ chairman, Michael Joseph, termed Ms Mathuka’s absence from work an internal Kenya Airways matter.
“She is on leave. I’m a bit disappointed that you people of the media want to report every detail including internal matters at KQ,” Mr Joseph told the Business Daily Tuesday on the sidelines of an aviation meeting.
Ms Mathuka’s mobile phone has remained off since Monday.
Kenya Airways has been investigating the source of leaked sensitive company information from the board.
The management turbulence risks further hurting the loss-making airline in the transition period when it needs to find a new leader, who would continue the turnaround initiatives the airline began three years ago.
With Mr Mikosz leaving at the end of December, the airline will have to move fast to seek his replacement.
Chief financial officers typically step in to hold the CEO’s role on a temporary basis should the search of a leader extend beyond the timeline.
Ms Mathuka’s prolonged absence from work could cloud this process.
The early departure of Mr Mikosz, whom the airline relied on to turn it around, is a signal of the arduous task of improving the company’s performance.
Mr Mikosz was hired in 2017 and his contract was to run until next year before he decided to shorten it for personal reasons.
The CFO position at Kenya Airways has been a turbulent one. Ms Mathuka replaced Dick Murianki, who was moved back to head the airline’s cargo unit “at his own request.”
Alex Mbugua, the then CFO, told the court in 2016 that Kenya Airways sacked him from the position, raising the alarm over irregular ticketing practices in some overseas stations such as London, and for recommending a review of KQ’s relationship with Dutch national carrier, KLM.
Mr Mbugua had been awarded Sh144 million for wrongful termination, but the court reduced the payout gross salary for nine months estimated at Sh27 million.
The airline made a net loss of Sh8.5 billion in the half year ended June, more than double the net loss of Sh4 billion in a similar period a year earlier as costs rose faster than revenue.
Sales in the six months period rose to Sh58.5 billion from Sh52.1 billion, representing a 12.2 percent increase. The loss saw the company’s negative equity widen to Sh16.1 billion from Sh2.4 billion, underlining the airline’s capital crisis.
KQ’s problems have been linked to a mix of increased competition, corruption, mismanagement and a previous debt binge that continues to weigh on its balance sheet.
Lawmakers in July voted to nationalise the carrier, which is 48.9 percent government-owned and 7.8 percent held by Air France-KLM.
The Directorate of Criminal Investigations recently launched a probe into some of the company’s past operations, with a focus on procurement of services for the maintenance and repair of aircraft engines.
KQ hires third party firms to carry out the maintenance of the critical aircraft parts. It is not clear which firms and individuals are being targeted in the investigation.
According to the DCI letter, the probe will review everything from procurement and budget plans, tender advertisement/request for proposal, list of pre-qualified suppliers and tender documents for potential bidders.
As losses continue to pile up, the government now proposes to nationalise the airline after abandoning an earlier plan to merge it with the Kenya Airports Authority (KAA).
The abandoned deal envisaged the merger of operations of Kenya Airways and the Jomo Kenyatta International Airport (JKIA) in a strategy meant to deliver the twin benefits of rescuing the national carrier and cementing Nairobi’s status as a regional transport hub.
Under the nationalisation plan, Kenya wants to follow countries like Ethiopia, which runs air transport assets that includes airports and airlines under a holding company.
Under the model approved by lawmakers, Kenya Airways will become one of four subsidiaries in an Aviation Holding Company.