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Companies

How we plan to steady the ship and fly KQ back to profitability

Kenya Airways chairman Michael Joseph. PHOTO | FILE
Kenya Airways chairman Michael Joseph. PHOTO | FILE 

Michael Joseph, the former CEO of telecommunications company Safaricom, recently grabbed headlines when he was appointed a non-executive chairman of the troubled national carrier, Kenya Airways.

Mr Joseph has set out to undertake the huge task of stabilising the wobbly airline.

The Business Daily interviewed him recently on the intricacies of his new position and his rescue plan for the carrier.

Congratulations on your appointment. So, what are your immediate priorities for the airline?

Thank you. I want to strengthen the management team, continue with Operation Pride and fully extract its benefits and also improve our employees’ morale. In management, for instance, we do not have a human resource director or a substantive chief finance officer.

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These positions are vital. We have to restore the brand to its right place by looking at elements like pricing, on-time performance, our service on the ground and the air.

Let’s talk about the Deloitte audit report that highlighted theft and mismanagement at KQ. What’s the latest with that?

Some facts in this report are real, others are not. There are a couple of serious things in there which we have to deal with. Indeed, some individuals manipulated the system to enrich themselves.

Other issues touch on processes and procedures. We’ve asked management to look at these items and report to the board on what they are doing about it. Their report is due on November 24 through the audit and risk committee. The board shall act based on their recommendations.

KQ pilots have been pushing to have chief executive Mbuvi Ngunze sacked. How secure is his job?

I met our pilots and we had a good discussion. I explained that Mr Ngunze is important to me at the moment. I am not making this statement forever.

He is in the middle of renegotiating with our financiers to get better terms in order for us to get out of the financial hole we are in. He is critical in that process since he knows and understands these people.

There is a perception out there that KQ is unreasonably more expensive than its competitors. What’s your take on this?

I have heard these complaints before. Indeed, it does sound like we are expensive on some routes. It is a balancing act; from an economical and financial point of view, you should maximise revenue on every route.

If you monopolise a route, you can charge whatever you like. And that is where I think we have gone too far. We must balance what we can charge for a route and what we actually do charge.

We should not price ourselves out of the market. I am concerned about this especially on our domestic routes. We just hired a commercial director and part of his mandate will be to look into this. I want Kenyans to fly KQ by choice.

The airline needs at least Sh60 billion to get out of its financial mess. Have you initiated talks with your major shareholders, or prospective partners, about this?

We are not engaging anybody at this moment. When we reach an agreement with our creditors, we shall move on to our financial requirements.

What I hope will happen is that we shall get some cash flow in from both KLM and the Kenya government and we shall see whether that is enough to take us forward.

It is not the right time to look for strategic partners or alliances. Once we have improved our balance sheet, maybe we shall do that.

What’s your take on the work that McKinsey is doing?

What I have seen from McKinsey is a process and a structure on how to drive improvement in the company. They have an approach that not only identifies the cost savings but gets them as well as revenues.

Kenyans tend to love the status quo. We say this is how we shall get revenues but let us do that tomorrow. I think the opposite is McKinsey’s strength. I am waiting for them to deliver the goods.

KQ and KLM entered into a joint venture years ago. There has been talk that this partnership is not beneficial to KQ, with some people suggesting it be struck out. What’s your position on this matter?

I understand there are some things in the JV [joint venture] agreement which need to be corrected since they are more in favour of KLM than they are for KQ.

I have already spoken to KLM about it and they are willing to renegotiate it. I will spend some days with their CEO in Amsterdam to discuss this in two weeks (next week). But from what I have seen and heard, I do not think we should kick out KLM.

Maybe they have been benefiting financially more than we but it is wrong to say they have been bad for KQ. KLM is an important alliance for us; they bring us a lot of passengers.

The Kenya Airways share has gained value over the past weeks, with analysts attributing this improvement to your appointment.

Yes, I have noticed the share price jump. I think this is being driven purely by emotions and not fundamentals of the company. We have started the process of getting the fundamentals right at KQ and that should provide a better basis for investors.

How long should Kenyans be patient with you? When should the public expect to see financial improvement at KQ?

Admittedly, there is a lot of work to be done at KQ. Change will not happen in a day or two. I think we should begin seeing some positive changes at the airline after a year or so.

Any regrets or butterflies about your new job?

I do not regret taking up this job. I am up to the challenge. I was requested to become the chairman by the government, the President. I have declined it before but this time I am better positioned to do it now for reasons I cannot disclose just yet.

I have been in the telecommunications industry all my life.

This is totally different. You should always have some mental, intellectual challenge in your life. I am not the type of person to go retire. I have a legacy in Kenya which I want to preserve and KQ is another step in the way of doing exactly that.

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