Kenya Airways (KQ) has announced that its CEO Mbuvi Ngunze is set to leave the company in early 2017. The exit of Ngunze comes less than a month after Dennis Awori was ousted as the chairman of the board of the airline company. Michael Joseph, a former CEO of Safaricom (SCOM), was tapped for the chairman role after Awori’s exit.
The departure of Ngunze now marks another high point in the leadership shakeup at Kenya Airways amid efforts to turn around the company. From an investor viewpoint, the exit of Ngunze could herald better times for shareholders of Kenya Airways.
The airline’s employees have protested Ngunze’s leadership, with pilots at one point threatening to go on strike to force his resignation. As such, Ngunze’s exit could boost employees’ morale, which is important for achieving a successful turnaround of the struggling company.
The return of an expatriate
Joseph has hinted that a foreign expert may be brought in to run Kenya Airways after Ngunze paves the way. He said that the search for the next Kenya Airways chief executive is already on and it is global, adding that that they are considering recruiting someone with extensive knowledge and experience in running an airline company.
That’s a signal that the board is looking for an executive who can do a better job than Ngunze. Considering that Ngunze worked at Kenya Airways for several years as chief operations officer before he was promoted to succeed Titus Naikuni as CEO in 2014, it is safe to conclude that Ngunze’s replacement would be a real warrior with a track record of turning around ailing airline companies.
As for a foreign expert being tapped to run Kenya Airways, the company has been led by an expatriate before so it won’t be the first time that it falls in the hands of a foreigner. Perhaps what investors might want to know at this juncture is how the company can perform under the leadership of a foreign CEO. While what lies in the future is everyone’s guess, Kenya Airways fared well under former CEO Brian Davies, an expatriate who led the company for seven years and left in 1999.
But we are talking about the future and there is no guarantee that another expatriate will execute with same level of success as Davies. The environment has changed significantly since Davies left. For instance, the airline industry has become more competitive in the recent years as more players have entered the business with disruptive strategies and incumbents, save for the struggling ones like Kenya Airways, have responded to the challenge by strengthening their operations in multiple ways.
Identifying the problems
Kenya Airways’ new CEO will find an execution framework in place, which should speed up the turnaround process. The airline company hired Deloitte to do a forensic audit that revealed massive theft that contributed to the company’s woes and nearly pushed it to the brink of collapse. Kenya Airways tapped McKinsey to help it draw a restructuring plan that is expected to guide the incoming CEO.
Kenya Airways logged a loss of Ks26.2 billion on revenue of Ks116.16 billion in the fiscal year to March 2016, wider than a loss of Ks25.7 billion in prior year. The amounting losses and employee protests made it difficult for Ngunze to keep his job.
Major shareholders
Dutch airline company KLM and the government of Kenya are the major institutional shareholders in Kenya Airways, each owning more than 20% of the company.
Stock movement
Kenya Airways shares are up about 32% since the beginning of 2016 and up 35% over the last one year. But the stock is down 98% over the last three years. With a market cap of Ks9.73 billion, Kenya Airways is a component of Kenya NSE 20, the benchmark index for 20 largest companies on the Nairobi Securities Exchange (NSE).
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