Kenya Airways banks on Mbuvi Ngunze to fly to greater heights

Incoming chief executive of Kenya Airways, Mr Mbuvi Ngunze, faces the daunting task of turning around the fortunes of the national carrier which, for the second year running, has made losses.

Mr Ngunze, who assumes his new role from December 1, takes over the carrier at a time when global aviation is facing challenges that have dampened the outlook of the industry, with other major global players posting dismal results.

Notwithstanding the monumental task that awaits his successor at KQ, Mr Titus Naikuni, the outgoing chief executive, praised the board for picking Mr Ngunze to lead the airline, terming the appointment “a positive change”.

“I think Mr Mbuvi will set the pace for the growth of the company and its personnel,” Mr Naikuni said.

The chairman, Mr Evanson Mwaniki, was also optimistic that Mr Ngunze would take KQ to higher heights given his prior experience as chief operating officer at the airline since September 2011.

Mr Ngunze’s in-tray is already full, starting with a runaway insecurity that is affecting operations, rising competition from Middle East carriers and fuel costs, which continue to eat at profitability. In the last year, travel advisories saw passenger numbers drop by 20 per cent on some routes, especially in European destinations.

“We are also losing passengers from a few countries from the Far East, such as Japan,” Mr Naikuni said, adding that such a challenge is beyond Mr Ngunze.

“It all depends on how we manage the whole security aspect as a country. If we don’t tackle it effectively, it will keep affecting business,” he observed.

The fire incident at the Jomo Kenyatta International Airport in August last year adversely affected passenger transit, and continues to exert immense pressure on the airline owing to bad publicity.

TRAVEL ADVISORIES

The September 2013 terrorist attack at the Westgate Mall in Nairobi followed by a series of other attacks in Kenya significantly impacted on leisure travel from traditional markets, whose effects were made worse by travel advisories by foreign governments including the US, UK and Australia.

Changing market dynamics, together with civil unrest in some countries, also led to suspension of flights to Gabon, Central African Republic, Burkina Faso and Egypt. This resulted in year on year net capacity reductions of 5 per cent in Africa, excluding Kenya. The African airspace is also heavily regulated, a challenge that KQ already faces even as it also focuses on increasing its intra-Africa routes.

The airline also faces the challenge of double taxation that is now left for Mr Ngunze and the government to address. So far, government has addressed the issue with South Africa, and negotiations with Nigeria are in final stages, but there are a lot of other countries involved. The idea behind the double taxation agreement is that if an airline pays tax in a foreign country with which it has signed a tax agreement, the airline can claim back that tax in the home country at the end of the financial year.

“Depending on whether it is VAT, Sales or Corporate Tax, we pay between 2 and 20 per cent of total revenue, which we can then claim,” the airline’s Finance Director, Mr Alex Mbugua, said.

For slightly over a decade, Mr Naikuni has overseen the transformation of the national carrier from a medium-sized airline with 16 aircraft to one of the largest carriers on the continent, with 45 aircraft.

The airline’s 10-year Project Mawingu, which seeks to increase passenger numbers to 14 million by 2021, now falls in Mr Ngunze’s hands. To that end, work at the Greenfield Terminal, whose capacity is projected at 20 million passengers per year, is ongoing.

The anticipated capacity is also tied to the delivery of high capacity aircraft, including the Boeing 787 Dreamliners and the Embraer jets. The Dreamliners, with two already delivered, will service the European and Fast East markets, while the Embraer jets will be used for mostly short haul service markets within Africa.

Mr Ngunze, a BCom degree holder from the University of Nairobi, has previously worked for blue chip companies such as PriceWaterhouseCoopers, Bamburi Cement and Hima Cement in Uganda.