Why Titus Naikuni and Company should be prosecuted


31 Jul 2015 | by GW Investigations
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Why Titus Naikuni and Company should be prosecuted

The story of Kenya Airways is that of from grace to grass. It’s a story of how individuals led by former CEO Titus Naikuni inherited a profitable company and crashed it into loses to the tune of 25 billion, the biggest ever made by any blue chip company in sub Saharan Africa.............

The story of Kenya Airways is that of from grace to grass. It’s a story of how individuals led by former CEO Titus Naikuni inherited a profitable company and crashed it into loses to the tune of 25 billion, the biggest ever made by any blue chip company in sub Saharan Africa.

This week the new CEO Mbuvi Nguze, a man who was an understudy of Naikuni for over a year finally accepted that the company is technically insolvent and in the process have moved to borrow from ‘Peter to pay Paul’ sh 120 billion to plug and stave liquidity.This announcement by the firm comes after the government injected Sh 4.2 billion into the national carrier that is meant to see it back into profitability. The firm attributed its losses to competition from the Middle East airlines, travel advisories and terrorism.

The airline is however optimistic after its re-entry into the West African market even as it seeks financial assistance from to the tune of $200 million (Sh 20 billion) from Afrexim Bank that will help refinance the business.During the last financial year, Kenya Airways made a spectacular announcement that it made the biggest loss any corporate body has ever made in Kenya, sh12.5 billion.Few Kenyans seemed to notice this loss that was for the half year to September 30  but you cannot blame Kenyans for this given that Kenya Airways has been on decline over the last four years. The loss reversed a profit of sh354 million made during a similar period.

The massive loss came at a time Titus Naikuni was handing over to the new chief executive office Mbuvi Ngunze.The national flag carrier has been making losses over the years under the watch of Naikuni.In 2011, Kenya Airways reported a loss of sh2 billion. To turn its fortunes, the airline went for the easiest option-retrenchment.It kicked out 600 employees as a long term solution to maintaining a huge wage bill. However, this did not solve the problem.The following year, the airline lost a further sh4.7 billion. This time the blame was squarely placed on high fuel costs and loss of passengers attributed to travel advisories as a result of terror attacks to key tourism installations in the country.Last year, the hole grew bigger with the airline, ranked as the fourth largest in Africa reporting losses amounting to sh7.9 billion.It was therefore not surprising that little or no voice was raised when the big announcement came last month.


The national carrier said its earnings were affected by slow growth in passenger numbers despite their investments in new aircraft, as it handled 2.1 million passengers over the period — an 8.2 per cent increase from 1.94 million last year.Mr Ngunze, who officially took over as CEO from on November 1, said the suspension of some flights to two West African routes hit by the Ebola epidemic insecurity at the Coast “dampened” performance.Unaudited group results released to the Nairobi Securities Exchange show revenue for the period increased 4.5 per cent to Sh56.8 billion from Sh54.3 billion during a similar period last year, while direct operating costs increased 13 per cent to Sh42.1 billion.



“Kenya Airways operated under a very challenging business environment in the first half of the year following the fire at the hub airport JKIA, and regional insecurity leading to reduced travel into Kenya and hub avoidance.” the airline said at one of its investor briefings.Turnover increased by 4.5 per cent to Sh56 billion. The company incurred an operating loss of Sh5 billion mainly because it operated under capacity.Mr Ngunze said the figures also reflect an impairment loss of Sh5 billion on write-down of aircraft approved for sale by the board.

As the airline made losses, nobody raised a voice to criticise Naikuni for running down a profitable organisation when he took over more than 10 years ago.

The excuses given for the loss have been anything but convincing. But it seems finally the shareholders of the airline have started voting with their feet.The airline/s share price is at an all time low of sh8.60 from sh14.70 during the same period last year.This year fewer shareholders than in past years attended the company’s AGM at the Bomas of Kenya conference centre yet those who were present left no doubt in their questions raised that they expected a sharp turn to the better in the future to break a streak of loss making years and return to profitability as early as the next financial year.Morale at the national carrier Kenya airways is at an all time low after the management reduced the salary of cabin crew by half.In a move that runs counter to employment practice, the airline slashed the salaries without alerting the staff affected.Shocked staff learnt of the reduction when they received their January salaries.


This was the second time cabin crew members from the airline that claims to be the pride of Africa had been punished.Last time there was retrenchment at the airline three years ago, the cabin crew were the main culprits.According to staff we spoke to, the airline runs two sets of cabin crew-permanent staff and casuals. It is the permanent staff who have taken the hardest hit.The workers one so being demoralized with some suspecting that it was a plot by the newly minted chief executive Mbuvi Ngunze to force them out.


The frustration by the crew is exhibited staff who talked of poor business facing the national flag carrier."The newly acquired planes hardly fly because there is no business" , one crew member told the Gazette Weekly.The salary slash comes hardly three months since the airline announced a loss of sh12.5 billion, perhaps the biggest ever by any corporate body in Kenya.

 

 

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