KQ ends McKinsey deal as rebound plan enters final stageFriday February 10 2017
Kenya Airways has terminated an 18-month contract it had signed with global consultancy McKinsey as the airline's turnaround plan enters its final phase.
The national carrier, known as KQ by its international code, hired McKinsey to help implement about 400 cost savings and revenue generation initiatives for which the US firm was to earn performance-based fees.
Micheal Joseph, KQ’s chairman, now says that the airline has reviewed this “performance-based” contract after one year and will instead buy services from McKinsey on-a-need basis depending on availability of resources.
“At the Board meeting held on Thursday, and at my request, we agreed to change the contractual relationship we have with McKinsey going forward,” Mr Joseph said during a press update on KQ’s operations Friday.
“We have, by mutual agreement (with McKinsey), agreed to stop this contract and turn to a new one where we pay for certain expertise that they offer and which we still need at KQ on a time and material basis,” he added.
Mr Joseph said this contract revision was adopted at Thursday’s Board meeting, adding that all continuing turnaround initiatives are being handled by KQ employees even as management negotiates a new arrangement with McKinsey.
Termed “Operation Pride”, the 24-item strategy the airline drafted included elements such as review of prices, revenue management, sales, cost reduction and cash and financial optimisation among others.
Mr Joseph said that this plan is now 55 per cent complete.
READ: KQ eyes rebound with McKinsey turn-around plan
Come under scrutiny
The airline, which has reported successive full-year losses for the four years to March 2016, was also expecting Sh14.6 billion from sale of 30 acres of land in Embakasi and the disposal of aircraft.
KQ’s arrangement with McKinsey has come under sharp scrutiny following media reports that the struggling carrier has paid the consultancy firm upfront even before delivering on its objectives.
Mr Joseph, who has been the airline’s chairman for about 100 days, and KQ chief executive Mbuvi Ngunze both declined to expound on the specifics of the contract citing confidentiality considerations.
“We still have to negotiate the exact terms of the new contract. I however think the best way would be to terminate the old one and get into a new one. We shall finalise that change soon,” said Mr Joseph.