Africa: Why turning around Kenya Airways was a tough task for Mikosz

When Sebastian Mikosz was appointed in 2017 to head the ailing national carrier Kenya Airways , it was hoped that his tenure would be the beginning of brighter days for the airline.

After all, the Polish national had a good track record behind him, having turned around the fortunes of such companies in Europe, among them Polish government-owned carrier LOT.

But two years down the line, Mr Mikosz has thrown in the towel, leaving the future of KQ hanging in the balance.

Mr Mikosz announced two weeks ago that he will be resigning at the end of this year, citing personal reasons, about six months to the completion of his three-year term.

In an internal memo to staff, Mr Mikosz said he had decided to shorten his contract. “It is my personal decision and I have obviously discussed it with the board as well as my family,” he said.

Pundits are, however, divided on whether his tenure at the national carrier made a major difference or not. Whereas some believe he did not do much to lift the fortunes of the airline as it was expected, others argue that the environment was not conducive for him to meet expectations.

An aviation expert who spoke to Sunday Nation said there are three cardinal elements that an airline must have for it to be successful and that KQ lacked all of them, making it difficult for Mr Mikosz to meet his targets.

Owning aircraft
One, he argues, that KQ should not have been in the business of buying and owning aircraft, especially the long-haul ones when it does not use all the capacity. Instead, it would have been better off leasing.

“The Dreamliner aircraft that KQ bought are not fully utilised except on New York route. It does not make sense to have such huge equipment and have them only ply connecting hubs like Amsterdam or Heathrow then come back to Nairobi,” says an expert who sought anonymity because he is consulting for the airline.

He says for the airline to have been successful, it has to land at a connecting hub in Europe, drop passengers and make the journey to a different destination without having to come back to Nairobi.
“That way, the airline would have used its full capacity as a long haul aircraft, increasing the revenue,” he added.

The expert also argued that it does not make sense for KQ to only fly in single cities in the European capitals such as Paris, London or Amsterdam.

The expert added the work environment resulting from opposition among some of the management made Mikosz’s work difficult at the helm of the airline.

“The second aspect for success of any airline is the personnel. And if you don’t have the support and people with the right attitude towards your plans, then you cannot achieve much,” he said.

However, economist Toni Watima says Mikosz did not succeed in his mission as had been largely expected by shareholders.

“He has not achieved the things that he was hired to do. The cost of operation is still high, which means the trend is just the same as it has been with the previous management,” says Mr Watima.

Managerial problem
He argues that the business for KQ in terms of passenger numbers and cargo is there but the cost of operation has been rising, a thing that points to managerial problem at the company.

In the financial report that KQ released recently, the airline says that its growth in revenue was mainly boosted by expansion in number of passengers in the review period to 4.8 million from 3.43 in 2017.

Mr Watima says though Mikosz cited personal reasons for quitting before the end of his term, he must have been forced out by pressure from shareholders. Last year marked the fifth consecutive year that KQ shareholders missed dividend payouts.

For the nine months result for 2017, the cost of operation was Sh87 billion with estimates for the whole year putting the overheads at Sh116 billion, being an average of Sh9.6 billion per month.

Mr Watima says one of the reasons why Mr Mikosz was hired was to address the overhead costs and the managerial problems that ail KQ.

“Mr Mikosz was brought in as a turnaround manager to restructure the airline and reduce cost. As much as there have been growth in revenue, the overhead cost have been going up as well,” says Mr Watima.

Fleet expansion
Mr Mikosz, whose terms was to end in June next year, said then he is betting on fleet expansion, adding new routes and collaboration with African airlines that are seen to pose a threat to KQ’s regional market share for a better outlook in 2019.

The 2018 results marked the fifth year in a row in which the Nairobi Securities Exchange-listed airline remained in the red.

Mr Mikosz’s biggest blow came recently when the government made a change of heart on its planned merger with Jomo Kenyatta International Airport (JKIA), which it was hoping to use to turn around its fortunes.

Kenya Airports Authority (KAA) did not help as it questioned the financial viability of the deal, given that KQ was the one in problems.
Unions have never been on its side — they have been demanding the removal of Mr Mikosz as well as the management team.

Kenya Airways posted Sh7.55 billion net loss for year ended December 2018 as higher costs offset a jump in revenue. The carrier’s full-year results do not have a comparable period because KQ, as the airline is known by its international code, in 2017 changed its reporting period from ending in March 31 to now end on December 31.


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