- Mr Naikuni is widely credited for growing the company and guiding it through a series of challenges including a staff unrest, tough business environment and the Duala air crash, which the CEO counts as his lowest moment.
- The incoming CEO takes office at a period that is seen as crucial to the company’s long-term prospects, with his main task being to ensure that the airline gets back into the profit zone and is able to deploy its new planes profitably.
- With the airline facing assaults on multiple fronts, including from Middle Eastern carriers, the negative effects of travel advisories facing the country and multiple security problems across Africa, its main market, Mr Ngunze has his work cut out.
Kenya Airways has appointed Mbuvi Ngunze as its new CEO, replacing long serving Titus Naikuni, who steps down after 11 years at the helm of the national carrier.
In a widely expected move, the board last week announced it had settled on Mr Ngunze, 56, in a move analysts say paints a picture of a company keen on strategic continuity. He takes over on December 1.
Mr Ngunze has been seen as the most obvious successor to Mr Naikuni since his appointment as KQ’s chief operating officer in 2011 from Lafarge, where he held different positions across its global operations, ending his stay as the head of its Tanzania business unit.
“I am still absorbing the news of my appointment… but I will make my plans known in coming days,” said Mr Ngunze.
Mr Naikuni is widely credited for growing the company and guiding it through a series of challenges including a staff unrest, tough business environment and the Duala air crash, which the CEO counts as his lowest moment.
The incoming CEO takes office at a period that is seen as crucial to the company’s long-term prospects, with his main task being to ensure that the airline gets back into the profit zone and is able to deploy its new planes profitably.
The company made a net loss of Ksh3.3 billion ($37 million) compared with Ksh7.8 billion($88 million) in 2013. The airline has received two Boeing 787s as well a B777 this year and expects to receive a couple more later this year. growing its passenger capacity by an additional 40 per cent in the next 12 months. (See video)
“We plan to increase frequencies to Entebbe and Dar es Salaam while at the same time introducing flights to Beijing and Abuja,” said Mr Naikuni.
But with the airline facing assaults on multiple fronts, including from Middle Eastern carriers, the negative effects of travel advisories facing the country and multiple security problems across Africa, its main market, Mr Ngunze has his work cut out.
“The travel advisories have cut passengers numbers on some routes by as much as 20 per cent,” said Mr Naikuni.
The airline is already struggling to attract passengers, with load factors dropping from 68.7 per cent in 2012/13 financial year to 65.6 per cent in the 12 months to March, well below the African average of 69.9 per cent.
The airline said it was considering taking up its options on both the Embraers and the 787s. One of the options for the 787 comes up at the end of the year, while the rest come up early next year.
“You really want to be patient and get the best deal… remember there are new variations of the 787 coming up every other month… we want to wait and get the best deal for ourselves.
The continued push into the continent of Middle Eastern carriers as well as the expansion plans of KQ’s main rival in Africa, Ethiopia Airlines, also present a new challenge for the carrier.
Emirates and Qatar Airways generate more revenues from Africa than South African Airways, Ethiopian Airlines and KQ combined.
But it is the business strategy of Ethiopian Airlines that could pose the biggest challenge to Kenya airways. While KQ has opted to establish code-sharing agreements with African airlines, Ethiopian has gone all out establishing mini-hubs across Africa.
But the arrival of new planes could offer some reprieve.
The airline says it would retire part of its B767 fleet, replacing the relatively older model with the B777 and B787, a move it expects will help it lower fuel costs. Boeing says the B787 burns 20 per cent less fuel than the B767.
Fuel is the single largest operating cost for airline accounting for as much 40 per cent of total costs. The airline says it is exploring the option of procuring its own fuel to further manage costs.
“We are considering whether we should do the handling ourselves or whether we should get a third party do that for us... but the main aim is eliminating the middleman,” said Mr Naikuni.
The new CEO will also be looking at ways of pushing the growth of Precision Air, where it has 41.2 per cent shareholding and JamboJet, its low cost carrier.
While JamboJet is doing relatively well, Precision Air continues to struggle with EY’s auditors warning in the airline’s 2013 annual report released last November that the company’s liabilities were greater than its asset.
The audit report painted a gloomy picture of the loss-making firm, saying its liabilities had exceeded its assets by Tsh83.14 billion ($53 million).
Source: The East African
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