Kenya Airways chairman to quit but Ngunze fate not clear

Published by Daily Nation
On 16 October 2016 saa 01:22
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Troubled national carrier Kenya Airways is staring at millions of shillings in losses as the intended industrial action by its pilots inches closer, putting pressure on the airline whose contracted staff are already on strike amid reports of ticket cancellations.

Despite a court order barring the strike, the Kenya Airline Pilots Association (Kalpa) has said its members will not work come Tuesday even as the government, which owns 29.8 per cent of the airline, stuck to its guns in opposition to the strike, paving way for what could be a financially costly standoff for the troubled airline that is trying to fly out of turbulence.

“The government stands by the statement released earlier and we demand that Kalpa withdraws the strike notice immediately especially given the court order demanding that they do so,” Transport Permanent Secretary Irungu Nyakera told the Sunday Nation.

“We have, through the Ministry of Labour, appointed a conciliation committee which will meet on Monday to help the two parties reach an amicable solution,” he said.

But unless a solution is reached in good time, the airline will on Tuesday be forced to book travellers in hotels or reimburse money already paid for tickets, further increasing operation costs while denting its image.

Just two weeks ago, several passengers on local routes were inconvenienced after several flights were either cancelled or delayed. A week earlier, a plane from Entebbe burst its tyre during landing at the Jomo Kenyatta International Airport while flight KQ570, on the Johannesburg-Nairobi route, has been in the news due to flight mishaps.

Kalpa has trashed the government claim that pilots have no role in determining the airline’s leadership insisting that, as an association, they have vested interests and a moral obligation to question the recovery and transformation.

“The attempt to paint Kenya Airways pilots in a negative light by stating that the airline lost Sh200 million as a result of the April industrial action is indeed a diversionary tactic. It must be highlighted that Kenya Airways has lost Sh52 billion in the last two years mainly through bad decision making and corruption,” said its chief executive Paul Gichinga.


“At a time when Kenya Airways management has delayed making contractual payments on KQ staff medicals, loans and mortgages, it is instructive to note that the airline’s management has been diligently making payments to McKinsey & Company to the tune of Sh2.3 billion, in the last one year alone,” he said.

However Career Directions Limited, the company that manages the outsourced 500 contracted employees who downed their tools on Friday demanding that their salaries be at par with in-house staff, accuses Kalpa of inciting them to strike, further complicating an already difficult situation.

Outsourced employees who are mainly ground staff and cabin crew work on a contractual basis and are paid significantly lower than the other 3,000 staff and were introduced in 2012 in an effort to cut down on the airline’s huge wage bill. CDL, in this case, also takes six per cent of their pay for insurance, NSSF and its own management charges.

“Like any outsourcing business we agree on who we want to hire but it is KQ which determines what it will pay them and not us,” CDL’s managing director Lucy Manyara told the Sunday Nation.

“What Kalpa has done, and that is the truth because they have their own agenda, is incite our staff to demand higher salaries at a time when KQ is not making any money. They were supposed to come to us as their principal employer and then we were to inform KQ about the issues but they did not do that,” she said.

In what has been a turbulent two weeks for the national carrier, Transport CS Macharia said the chairman, Dennis Awori, would leave. This follows months of pressure from Kalpa and several flight delays believed to have been caused by a go-slow among the airline’s staff.

The government also recently hired former Safaricom CEO to the board in a bid to inject new blood in the airline even as Transport Cabinet Secretary James Macharia insisted that they had fired up to 90 per cent of KQ’s top management.

The fate of Mr Mbuvi Nguze, its CEO, whose exit Kalpa has also been demanding, remains unknown with the government being non-committal on the matter. He is among the airline’s top management that a leaked audit report by Deloitte has recommended for disciplinary action.

The CEO, in particular, is accused of gross negligence and abuse of authority for failing to exercise due diligence by approving the opening of an account at Dubai Bank at a time when the lender was almost falling.

He is also accused of approving a bank guarantee of $7 million from the bank which was $2 million above the approved limit.

According to the audit report, the guarantee facility letter for this particular request drafted on April 23, 2015 was found to have a forged signature of the airline’s former finance director Alex Mbugua but a genuine one from Mr Ngunze. Mr Mbugua was fired in January.


“We conducted a handwriting analysis of the signatures and confirmed that Mr Ngunze’s signature on the letter was genuine, but that the signature purported to be Mr Mbugua’s was not genuine,” says the report.

“The losses to KQ emanating from Mr Ngunze’s actions were: $350,000 being fees paid to Dubai Bank that resulted in a loss of $140,000 being excess payment; and an increase in contingent liability of Sh155,900,000 to KQ over and above the Board approved limit,” says the report.

In July, The Pride of Africa announced it had plunged deeper in the red after recording a Sh26.2 billion net loss for the year ended March 2016. This is a worse performance compared to the Sh25.7 billion net loss that the national carrier recorded a year ago.

Nevertheless, the airline insists its restructuring is on track. On Thursday, it said results for the first half of this year, which are due to be released in two weeks, will show a reduction in net losses from Sh12 billion to Sh5 billion, a 4 per cent rise in passengers and an increase in cabin load from 68 per cent to 71 per cent over the same period last year.

On Saturday, it stayed clear of the crisis and instead announced it will suspend flights to Abuja in Nigeria and Gaberone in Botswana from November 15 while increasing its frequencies in East Africa with a new mid-day flight to Kigali in Rwanda and Bujumbura in Burundi, making it 25 flights per week to these two destinations.

In what it refers to as “winter schedule”, the airline plans to increase its flight frequency to the Cape Town route, that goes via Livingstone, from the current three to four per week, and eventually to six times per week around Christmas to meet demand.

The airline will also increase its frequencies in East Africa with a new midday flight to Kigali and Bujumbura making it 25 flights per week in the wake of heightened competition from Rwandair which two weeks ago received what could be the first Airbus A330 in the region in a bid to eat into KQs market share.

According to the new plan which KQ refers to its winter schedule, the airline will be flying four times to its recently launched Cape Town route, add night flights To the Comoros and Madagascar routes and increase to five the number of flights to Dar es Salaam and Entebbe per week.

KQ has already had to deal with two separate industrial action threats by its pilots from the beginning of the year. In April the Airline claims it lost Sh200 million in just a few hours due to flight cancellations.

And with a solution not in sight and KQ inching closer to what could be its biggest industrial action by its workers yet, the Kenya Civil Aviation Authority (KCAA) has waded into the crisis urging the parties involved to seek a solution as the situation is already hurting the country’s economy and air safety record.

“A vibrant and highly competitive civil aviation industry is one where its key stakeholders operate in a healthy business environment.

We remain committed to our role and implore the aviation stakeholders involved, the Kenya Airways Management and Kalpa to resolve the grievances as provided for by the government of Kenya,” Gilbert Kibe the authority’s CEO said on Saturday.

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A Kenya Airways plane in full flight. Kenya Airline Pilots Association has said its members will not report to work on Tuesday.