Titus Naikuni is Running-Down the National Carrier Kenya Airways

Titus Naikuni the CEO of Kenya Airways (KQ) defied an executive order from the Government of Kenya and proceeded to retrench/declare redundant about 600 of its’ employees in its’ staff rationalization program. Naikuni ignored an order issued by Prime Minister Raila Odinga directing the airline to halt the retrenchment plan until it negotiates with the union or explores other cost cutting measures other than trimming its workforce.

Naikuni has also twice failed to appear before a parliamentary the Labour and Social Welfare Committee probing the retrenchment. A parliamentary committee powers are equivalent to those of a High Court .

While sacking a large number of Kenyans was swiftly undertaken, the same Naikuni is at the same time leading KQ into hiring flight attendants from India, Rwanda and Ghana in addition to the existing foreign crew from Ghana, Cameroon and Thailand, who have ‘The Pride of Africa’ to thank for creating employment in their respective countries.

The KQ retrenchment exercise is nothing less than an ethnic cleansing exercise going by the large number of employees from certain regions who have been handed their lay-off letters.

It is instructive to note that the Ministry of Labour has since declared the recent retrenchment at Kenya Airways (KQ) as illegal and termed the exercise as “cruel and barbaric.” Speaking before the Parliamentary Committee on Labour and Social Welfare, Labour Permanent Secretary Beatrice Kituyi said from her Ministry’s investigation there was no dialogue or pre-retrenchment counseling for staff, which went against the normal retrenchment process under the law.

Predictably, Minister for Transport Amos Kimunya, who also appeared before the Committee, supported the retrenchment exercise by the airline and insisted that due diligence was followed adding that the exercise was necessary because KQ could not sustain labour costs. Kimunya also supported ethnic profiling of top positions at Kenya Airports Authority and Kenya Ports Authority so his position on KQ retrenchment did not come as a surpruse given that  he also appears to be shielding Titus Naikuni as he goes about victimizing innocent KQ employees who are now being unfairly retrenched on basis of ethnic origin.

To quote some of the reasons given for this cruel and barbaric Naikuni staff retrenchment exercise, it doesn’t take much to see where the real problem lies. ‘…downturn in passenger volumes occasioning sharp shortfalls in expected revenue streams…increasingly competitive environment… direct operating costs being very high, employee costs and other overheads continued to rise disproportionately to rise in revenues..’ If indeed Kenya Airways is in such a precarious position, how did it get there?

During Naikuni’s reign at KQ, the airline has lost its leading position as an African carrier when it once boasted of having the the youngest fleet in Africa, Kenya Airways now plays second fiddle to Ethiopian Airlines (ET). Ethiopian also overtook KQ’s position as the launch customer for the Dreamliner aircraft. Naikuni now believes it is better for him and his top management to earn kick-backs from Embraer of Brazil whileET will have 5 Dreamliners by next month, and by the time Kenya Airways acquires its first one, our ET will be boasting a fleet of 10 dreamliners,

To underline their superiority over KQ, ET also boasts of fleet of 5 brand new Boeing 777-200LRs compared to the 4 Boeing 777s Kenya Airways has had since 2004. Between 2004 and 2012, Naikuni has been busy acquiring vintage Boeing 767s in warped strategy to be seen as appeasing the Board as saving money. This shortsighted and unprofessional thinking has put the airline in the pathetic position it is in now.

It is also a poorly kept secret why Naikuni and some top directors have embraced Embraer of Brazil. Some managers are receiving millions of dollars in kick-back when they approve acquisition of unsuitable aircraft from Embraer. One wonders why Naikuni ignores professional advise from technical team and industry players who are concerned about the large numbers of aircraft on order vis a vis KQ route structure and passenger profile.

The pilots, having looked at some of the planned routes for this aircraft have since raised fears that this will exacerbate an already serious problem of misconnecting passengers’ baggage and cargo. While the Embraer is a pretty ‘bird’ it is unable to operate out of high altitude JKIA with substantial payload, even for the routes it is planned for. Is the Embraer the aircraft of choice in an environment littered with Dreamliners and Airbus A380s?

Naikuni is once again setting up a low-cost subsidiary that would operate on domestic and regional routes, by the name Jambo Jet. Other than a name change, does Naikuni have any viable plan to make this Jambonet profitable?

Aircraft that operate on this business model often operate with minimum set of optional equipment, further reducing costs of acquisition and maintenance, as well as keeping the weight of the aircraft lower and saving fuel. Often, no in-flight entertainment systems are made available and some airlines even use only nonreclining seats. For example EasyJet’s aircraft cabins are configured in a single class, high-density layout. The airline’s main fleet, comprising Airbus A319 and A320 aircraft, carry up to 156 and 180 passengers respectively, depending on layout. A typical A319 carries 140 passengers in a single class configuration. FastJet (as Fly 540 is soon to be known) will be operating these same A319s.

Naikuni led Kenya Airways plans to compete with its newly acquired Embraer 190s. These aircraft, other than having leather seats, have full touch-screen on demand entertainment systems for each passenger and are configured in two classes, business and economy carrying a total of 96 passengers with 12 in business class. Is Jambo Jet really going to be able to compete with other low cost carriers with this equipment? Again, according to KQ management, Jambo is supposed to operate all flights falling under 4 hours flight time duration. Out of 56 destinations that Kenya Airways operates currently, about 80 percent are destinations within the Africa region of which about 93 percent fall within the 4 hour flight time range. Are we seeing the silent and deliberate killing off of Kenya Airways for the birth of JamboJet?

The main reason given for the problems bedeviling Kenya Airways is employee costs. A casual look at the financial results for the year ending March 2012 will reveal that there was a rise of a mere Sh2.2 billion in employee costs, while there was a staggering rise of almost Sh24 billion in Direct operating costs. While most of this was attributed to fuel costs at 40.7 billion, there is still another 36.5 billion that is not accounted for. Is the cost of delayed flights and hotel accommodations included here? Is the cost of misconnected baggage included here? Is the cost of cancelled flights included here? According to European Union regulations (EU Regulation 261/2004) passengers can get up to €600 as compensation for flight delays. That amounts to Ksh. 20 million per delayed/cancelled flight. The point here is, if management dedicated half the effort towards addressing this cost as it does towards employees costs, Kenya Airways might just get on the right path.

Kenya Airways corporate culture leaves a lot to be desired. Whatever the industry, the best companies have at least one element in common: a highly motivated, enthusiastic workforce that delivers exceptional service day after day. Most successful airlines have demonstrated the value of fully engaging every employee. Kenya Airways is bedeviled with employees that have low morale, and are constantly looking over their shoulder to avoid losing their jobs. Engineers in particular have been frustrated to the point that they are constantly looking for jobs with middle eastern carriers. Delays caused by technical problems can attest to this. When it comes to flight attendants, management has decided to outsource this essential service, a practice that stands in diametric opposition to good corporate culture. It is still a mystery where Career Directions Ltd sprouted from.

While Kenya Airways is a private company listed in the stock exchange, it still is a Kenyan company and as such must comply with the laws of the land. The work permits and crew certificates issued to foreigners have directly led to the retrenchment of Kenyans who have performed the same tasks for the last 20 years.

The Government of Kenya to act within the democratic framework of this republic and hence ensure that its actions protect, and do not in any manner undermine, the livelihood of the working people of this country who constitute the republics vast majority.

Pilots/crew members and senior management have openly stated that they no longer have confidence in Naikuni’s ability to successfully restructure the company and lead it to profitability.

Naikuni has also influenced KQ management to outsource some of its core business to private firms that he has interest in.

How long will this man Titus Naikuni be allowed to gamble with a strategic institution as Kenya Airways?

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7 comments on “Titus Naikuni is Running-Down the National Carrier Kenya Airways

  1. Senators cast doubts on Titus Naikuni’s stint at KQ

    Kenya Airways former CEO Titus Naikuni. Senators on August 13, 2015 cast doubts on his qualifications when he was appointed KQ boss. FILE PHOTO | SALATON NJAU | NATION MEDIA GROUP

    By DENNIS ODUNGA

    A Senate team investigating Kenya Airways’s loss streak on Thursday cast doubts on former Chief Executive Officer Titus Naikuni’s competence to head the national carrier.

    The committee, which met the Kenya Civil Aviation Authority (KCAA) management, said Mr Naikuni was not well suited for the position because he had no experience in the aviation industry when he was appointed.

    Committee chairman Anyang’ Nyong’o (Kisumu, ODM) and Mr Mutula Kilonzo Jr (Makueni, Wiper) said the Civil Aviation Act was clear that the accountable manager must have a background in managing commercial air transport.

    KCAA Director-General Gilbert Kibe and Head of Flight Operations Raphael King’ori were hard-pressed to explain why they did not question the suitability of Mr Naikuni for the post.

    KCAA DEFENCE

    The meeting at Parliament in Nairobi was also attended by KCAA board chairman Samuel Poghisio.

    Mr Kibe told the committee that the former CEO had gained experience because he was a member of the KQ board before he was appointed the boss.

    “The authority recognised the former MD. He was qualified. He was a member of the dream team when he was Transport permanent secretary. He… had knowledge in commercial operations,” said Mr Kibe.

    CLAIMS REJECTED

    Claims that the act was not in place when Mr Naikuni was appointed were dismissed, with the committee maintaining that Kenya subscribes to international aviation standards that emphasise competence.

    “You can’t think and neither can you estimate. You need to be certain. Prior to the current regulations, what (were) the qualifications for such an office holder? Mr Kilonzo asked.

    Prof Nyong’o said matters touching on the law cannot be left at the discretion of some people, as such a move can lead to poor services.

    “You veer from being right when you leave decisions to discretion,” he said.

    Kenya Airways posted a Sh26 billion loss in the last financial year.

    http://www.nation.co.ke/news/Doubts-cast-on-Titus-Naikuni-stint-at-KQ/-/1056/2831382/-/14jr1wrz/-/index.html

  2. The outgoing Kenya Airways Managing Director Titus Naikuni has succeeded in creating more problems for airline than when he found it. Key amongst these is when in 2012, Naikuni decided to flout procedure and retrench hundreds of its workers. Despite plea from COTU, Ministry of Labour, FKE and even office of the Prime Minister to suspend the retrenchment exercise, Naikuni (then backed by equally disgraced Transport Minister Amos Kimunya) went ahead with the massive retrenchment exercise.

    Nearly two years down the line, this week, a three judge bench of the Appeal Court comprising Justices Erastus Githinji, David Maraga and Agnes Murgor this week ruled that Kenya Airways will have to pay 447 former employees an eye popping Sh1 billion for unlawful termination of their services. How I wish the arrogant Jubilee supporter Naikuni would pay for this court order from his pocket!

    What’s disheartening is that when the Kenyan workers were being sent home, ostensibly to reduce the wage bill, the same airline was busy employing foreigners – at expartriate rates – as air crew and technical support staff! Now the time has come for KQ share holders to bear the burden of Naikuni’s politically motivated actions.

    http://www.the-star.co.ke/news/article-176247/kenya-airways-ordered-pay-sacked-employees-sh1-billion

  3. KQ’s recovery suffers blow as sacked workers are reinstated
    Naikuni
    A showdown looms at Kenya Airways after the Industrial Court ordered 447 employees to report back to work after they were laid off two months ago.

    Judge James Rika rejected an application by Kenya Airways’ lawyers for a stay of orders reinstating the workers as the airline studied the ruling with a view to appeal.

    “All the affected 447 unionisable employees are hereby reinstated to their roles at KQ held as of August 30 without loss of seniority, continuity, benefits and privileges,” Mr Justice Rika ruled in a judgement read over three hours.

    The decision is a major setback for the airline which was hoping to slash Sh1.3 billion off its payroll annually through the retrenchment. The airline reported a Sh4.8 billion net loss for the six months to September 30, this year.

    Kenya Airways chief executive officer Titus Naikuni said the company was studying the ruling and its implications.

    “We shall advice on the next steps in due course,” Mr Naikuni said.

    Mr Justice Rika said he reinstated the workers because their contracts were terminated unitarily and unfairly. He also ordered the airline to pay the affected workers salaries and allowances for the three months from September to date.

    The national carrier shed 578 jobs in September to control a wage bill that had doubled from Sh6 billion in 2007 to Sh13.4 billion last year. The rationalisation was expected to reduce staff costs by between 10 to 15 per cent or about Sh1.3 billion annually.

    The number of Kenyan employees had grown from 3,729 to 4,170 during the period while that of overseas employees rose from 425 to 664.

    (Read: Kenya Airways now renews its search for expatriate pilots)
    The ruling puts Kenya Airways’ hopes of reversing the loss made in the first half of the year in doubt.

    While releasing the results last month, Mr Naikuni had said that reversing the losses in the next five to six months would depend on a lot of things in the market-place going right.

    The airline issued a profit warning that its full year results would be a quarter less than the previous year’s in line with capital market regulations. For the year ended September 30, 2011, the airline made a net profit of Sh1.7 billion having been pinned back by high fuel costs.

    Revenues dipped by Sh5.1 billion to Sh49.8 billion and passenger traffic, which account for 90 per cent of the business, dipped 10 per cent to Sh43.6 billion in the first six months of the year. The airline made a net profit of Sh2.0 billion in the first six months of last year.

    Its share at the Nairobi Securities Exchange has lost 44 per cent in the past year to trade at Sh11.60 Monday, down from Sh11.90 last week on Friday .

    (Read: KQ’s share price dips 17.5pc amid low profit, lay-offs)

    The Aviation and Allied Workers Union went to the industrial court to overturn the airline’s action on the grounds that the management had breached the Labour Relations Act which requires negotiations with the union before declaring redundancies.

    Mr Justice Rika declined to stay the order of reinstatement for 45 days pending the appeal as was requested by the Kenya Airways.

    “The restructuring exercise was stopped by the court and KQ should not have in the first place stopped these employees from working after 4th September 2012. By asking the court to grant stay, KQ is asking the court to endorse its continued defiance,” ruled Mr Justice Rika.

    He also found that the layoff had nothing to do with poor financial results but was intended to get rid of employees involved in trade union activities.

    “Other roles became ‘unavailable’ to the grievants to allow for outsourcing. The decision to outsource was not driven by valid reasons and was simply a way of weakening trade union power,” the judge said.

    The company also failed to consult with the government.

    “Its largest shareholder is the government of Kenya, which through the Prime Minister, called for consultations, a call that was ignored by the KQ management,” said the Judge.

    He said KQ cannot be a national carrier yet continue to recruit Thais, Ghanaians and other foreigners while retrenching Kenyans.

    The government owns 29.8 per cent of the national carrier.

    Although the company presented its financial result for the six months to September as evidence that its business was facing difficulties, Mr Justice Rika said losses cannot be used as a reason to retrench.

    “Not every cyclic financial report of loss should be read as valid reason to justify retrenchment. Many companies make cyclic losses and do not rush to retrench,” he said and added that KQ was increasing its workload by adding more fleet and destinations and therefore needed more employees. He wondered why the airline was recruiting foreigners for similar roles.

    “KQ has recruited Thais, Ghanaians and plans to have more expatriates, even as Kenyans are told they must leave,” he said.

    gfayo@ke.nationmedia.com

    http://www.businessdailyafrica.com/Kenya-Airways-recovery-suffers-blow/-/539546/1635726/-/view/printVersion/-/ltrd05/-/index.html

  4. The nation half-reveals that Kenyans and KQ shareholders are ONCE AGAIN being fleeced through a Safaricom-Mobitelea type arrangement through ghost companies registered in the Cayman Islands with shareholders counting their profits right here in Nairobi.

    Goes to confirm reports that Naikuni and friends registered a company to receive kick-backs from Embraer. This is an arrangement which could not work if the planes were to come from either Boeing or Airbus.

    Each plane am told earns these folks a cool USD 1m, in addition to the publicized transaction fees, etc..

    Mystery of two firms dealing with KQ
    KQworkersdemo
    PHOTO | FILE Retrenched employees of the Kenya Airways hold a protest in Nairobi. The members the Aviation and Allied Workers Union revealed existence of two questionable companies working with the national carrier. NATION MEDIA GROUP

    By JOHN NGIRACHU jngirachu@ke.nationmedia.com
    Posted Sunday, November 11 2012 at 00:30

    When representatives of retrenched Kenya Airways employees first spoke of the existence of Amboseli Limited and Samburu Limited, two mysterious companies involved in the acquisition of planes for the national carrier, it sounded like a sensational claim by a disgruntled group.

    In their presentation to Parliament’s Labour and Social Welfare Committee on September 24, 2012, the Aviation and Allied Workers Union claimed the two companies were dubious and were engaging in business with Kenya Airways that needed some scrutiny.

    They told MPs that Amboseli and Samburu are owned by Kenyans, some of them in the management at the national carrier, and others prominent, well-known and powerful personalities. A leading presidential aspirant is among those whose names have been mentioned.

    The airline, they charged, was buying refurbished planes at a steep cost and from people who in one way or another determined how the purchase would be financed.

    The report Thursday by the Capital Markets Authority (CMA) shows that while the companies may not be exactly dubious, they are part of a financial mystery that may take time to unravel.

    Despite their Kenyan names, Amboseli Ltd and Samburu Ltd are registered in Cayman Islands, a tax haven 12,900 kilometres from Kenya in the Atlantic Ocean with a population of 54,397 (from a 2010 census) and with a cost of living higher than the United States.

    The two companies “borrow” money from a mysterious financier, buy planes, lease them to KQ and receive the loan repayments. They are the virtual owners of the planes, and ownership would only be transferred to Kenya Airways once the loans are fully paid.

    At the end of September, KQ had acquired planes worth Sh5.3 billion, equivalent to 6.85 per cent of its total assets which are valued at Sh77.43 billion. This amount, according to CMA, “is below the 25 per cent threshold stipulated in the regulations for an insurer to seek shareholders’ approval before proceeding”.

    CMA’s report to the House committee suggests that there is little they can do as a regulator, beyond having the publicly listed airline disclose its trade dealings.

    Parliament’s investigations into the affairs of the national carrier started after 74 employees, all members of the Aviation union, petitioned Parliament to have them reinstated and the airline stopped from firing more workers.

    The committee started its job soon after the September 13 petition presented by Naivasha MP John Mututho. But its quest to find out more about the airline has been met with remarkable stonewalling from the Transport ministry and Kenya Airways management.

    For instance, a meeting with Transport PS Dr Cyrus Njiru on September 26 ended prematurely after he clashed with MPs Charles Nyamai (Kitui West) and Pollyns Ochieng’ (Nyakach). The PS was accused of arrogance as he appeared unwilling to go beyond stating the ministry’s policy-making role in the aviation industry.

    Despite being a member of the Kenya Airways board, he couldn’t speak about the decision to retrench about 600 workers.
    With the MPs flustered at his approach and suggestions, committee chairman Sophia Abdi Noor adjourned the meeting and denied the PS opportunity to answer any of the queries.

    After the PS left, Mr Nyamai spoke of a growing sense of frustration among MPs with the government over the national carrier.

    It did not help matters that the CMA head had asked for more time to appear before the committee as he was out of the country
    “I think we’ve got to be a little bit cautious. What I’m seeing is a deliberate attempt by the government to delay the matter because they know we have 21 days (to settle it),” said Mr Nyamai.

    He alleged that Dr Njiru’s intention was to “rattle” the committee.

    A two-hour meeting with Transport minister Amos Kimunya on October 2, yielded little, but his stand when the matter first came up in Parliament on September 18 was plain.

    “Our rules are very clear. For a company listed on the Nairobi Stock Exchange, the only people who can direct them in terms of what to do is the regulator, which is the Capital Markets Authority, in terms of compliance of stock exchange issues or the courts. We, as Parliament, cannot interfere,” he said.

    The government, and therefore the taxpayer, is the largest shareholder in the company with 29.8 per cent (445 million shares) of the holding. Dutch airline KLM holds 400 million shares representing 26.73 per cent.

    Particularly jarring for shareholders is the recent announcement that the airline suffered a Sh6.589 billion loss in the first half year ended September.

    Kenya Airways management and the board have thrice refused to meet the committee on the basis that doing so would amount to subjudice because employees have filed a suit.

    A meeting with the CMA and the subsequent handover of the report on Kenya Airways goes some way to show who the shadowy financiers of the acquisition of planes could be.

    According to CMA, Amboseli and Samburu were established for the sole purpose of the transaction between Kenya Airways and the financier from whom it was taking a loan to buy planes.

    The two companies are owned by a charitable trust. CMA refers to them as “special purpose vehicles”. Their directors are two lawyers based in the Cayman Islands who are reported to represent the interests of the financiers.

    Kenya Airways repays the loans borrowed to purchase aircraft from the manufacturer (Embraer, a Brazilian company) but will only become the registered owners of the planes once the debt is fully settled. CMA said the airline pays the companies nominal fees ranging from $1,000 to $2,000 a year.

    “Kenya Airways Ltd has indicated that the structuring of the lease through the creation of Special Purpose Vehicles is a requirement of the financiers of the transaction and is common in the financing of purchases of large assets such as aircraft and shipping vessels,” says the CMA.

    It is hoped that the identify of the Kenyan businessmen behind Samburu and Amboseli will be unmasked.

    http://www.nation.co.ke/News/Mystery+of+two+firms+dealing+with+KQ/-/1056/1617148/-/gvigni/-/index.html

  5. Opinion
    The unfavourable position of KQ is a result of the expansion plan and modernisation of its fleet of aircrafts at a time when the global recession was already around.

    The IFC awarded Kenya Airways a US$ 15Milion loan to modernise the fleet of aircraft and Kenya Airways announced the issuance of rights worth KSh20 billion, aimed at increasing capital to support expansion plans. The issuance of rights was not well received (subscription rate of 70.06 per cent) and their main share holders (KLM and the Government) had to take-up additional shares.

    http://www.the-star.co.ke/news/article-15078/kq-rights-issue-misses-set-target

    The expansion of its passenger capacity and opening of new destinations is not in relation with demand hence increased labour cost without additional income.
    Such a situation requires adjustment of the expansion plan and delay of modernisation of its fleet.
    KQ took a gamble with their expansion plan and modernisation of their fleet at the wrong time.

  6. Kenya Airways chalks up $55m half-year loss, in profit warning
    By PAUL WAFULA | Tuesday, November 6 2012 at 12:41
    NaikuniKQ
    Kenya Airways chief executive officer Titus Naikuni (right) and group finance director Alex Mbugua during the half year results investor briefing at the Intercontinental Hotel, Nairobi on November 6, 2012. The Kenya flag carrier has recorded an $55m half-year loss in what looks a bad year for the global aviation industry. SALATON NJAU | NATION MEDIA GROUP

    Kenya Airways on Tuesday reported a Sh4.7 billion ($55.2 million) net loss in the first half of the year ending September 30, 2012.

    The Kenyan flag carrier, which recently resorted to cost cutting measures by sacking employees attributed the loss to reduced number of passengers and high fuel prices.

    In 2011, the airline reported Sh2 billion ($23.5 million) net profit.

    The airline’s turnover dropped 9.3 per cent to Sh49.8 billion ($585 million) in the six months to September 2012, mainly driven by a decline in passenger revenues.

    “We were unable to predict what was happening in the market place correctly, and this is one of the reasons we had to pull out of daily London flights. We also suspended operations to Rome, Muscat and Zanzibar in order to reduce the loss making routes,” Kenya Airways chief executive Titus Naikuni said in a press conference after releasing the results.

    Mr Naikuni said Kenya Airways incurred Sh826 million in recent staff retrenchment costs. The costs have also hit the airline’s first half’s performance but expects a Sh1.2 billion in savings going forward annually.

    Its total costs rose to Sh55.3 billion from Sh53.9 billion previously. Passenger revenues declined from Sh48.6 billion in 2011 to Sh43.6 billion. ($1 approximately Sh85)

    “The Kenyan market was negatively impacted by travel advisories which contributed to reduced passenger numbers to Kenya,” the airline said in a commentary accompanying the results.

    This negative performance pushed the airline to issue a profit warning for the full year results on grounds that it will not be able to match last year’s performance.

    “Though the second half is expected to be much better, we believe that it will not be able to lift us past the Sh6 billion comprehensive loss we have made in the first half. So based on capital markets guidelines, we issue a profit warning because we believe our full year results will be lower by more than 25 per cent compared to last year,” the airline’s chief finance officer Alex Mbugua said.
    http://www.africareview.com/Business+++Finance/Kenya+Airways+in+half+year+loss/-/979184/1612976/-/ub2uu3z/-/index.html

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