National carrier Kenya Airways a turnaround plan has taken off and will see the airline, among other things, fire a good portion of its employees. Chief Executive Mbuvi Ngunze says the airline has been working on a five-year return to profit plan with assistance from Mckinsey Consultants over the next 18 to 24 months.
Kenya Airways, which reported a half-year pre-tax loss of 11.9 billion shillings, has received Ksh20.5 billion from Afri-Exim bank as it restructures its debts. The airline last conducted a restructuring exercise in 2012, when it let go of 578 staff.
In the last six months, KQ’s staff reduced from 4, 040 employees to 3,964 employees. This figure is expected to reduce further in coming months as the airline awaits additional long-term debt from the Afri-Exim bank to facilitate the restructuring.
Also see: Kenya Airways sinks deeper into losses
“Looking at the head count numbers and the balance between the right numbers relative to the size of the airline will be an inevitable part of that process. And we have to do that in an un-emotional way. Again we have to be also sensitive that we are dealing with human beings, but we are also dealing with the business,” added Ngunze.
Kenya Airways has long-term loans of Ksh115 billion, with Khs52 billion in short-term loans, out of which Ksh25 billion is short term debt owed to local banks. This leaves the airline’s total equity at negative Ksh33 billion.
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Speaking to Citizen TV, Kenya Airways CEO Mbuvi Ngunze said the exchange rates have contributed to the debt accrued by the airline. “Ksh15 billion of that is from the exchange rate just from the restatement of loans,” he said. “The balance we have to work with our shareholders as part of the long-term capital raising road-map. Clearly what we have to resolve now is we need money in this window to allow us to buy us time to get the right level of results.”
The airline, however, posted a foreign exchange loss of Ksh4.8 billion due to the weak shilling. KQ, which has been surviving on expensive debt, continued to struggle in loss-making territory over the last six months. Total revenues remained flat growing by only 2 percent to 56.7 billion shillings, while total operating costs declined to 58.59 billion from 67.2 billion, helped by lower cost of fuel that dropped by 37.4 percent to 13.58 billion shillings.
“Within that plan there is of course a look at everything, nothing is sacred. Productivity is one of those things that we have driven significantly because it is important that we do more, with less,” stated the CEO.
Meanwhile, he said, Kenya Airways is in talks with its shareholders and the capital markets authority over long-term capital raising next year.
Next read: KQ, with losses piling, cuts executive pay to save on cash
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