KQ director resigns amid Senate push for shake up

Corporate News

Kenya Airways' Boeing 777-300ER aircraft at JKIA, Nairobi. The airline's commercial director Gerard Clarke stepped down from his job in October. PHOTO | FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

In Summary

• Gerard Clarke stepped down from his plum job in October, a month after Treasury secretary Henry Rotich told a Senate committee that some top KQ managers were likely to lose their jobs.
• Mr Clarke, 52-year- old Irishman, whose duty was ensure the airline generates sustainable revenue, quietly resigned in October, exactly two years since he took charge of the critical management position.

Kenya Airways’ commercial director has resigned, leaving the airline the space it needs to effect some of the changes the Government of Kenya has sought as a precondition to bailing out the cash-strapped carrier.

Gerard Clarke stepped down from his plum job in October, a month after Treasury secretary Henry Rotich told a Senate committee that some top KQ managers were likely to lose their jobs before release of the proposed bailout package.

A Senate committee report, which was approved on Thursday, also recommends the sacking of top managers as a pre-condition for the bailout, putting KQ executives in a tight spot.

“Our committee can conclusively state that the crisis bedevilling the national airline is a direct result of bad decisions made over time by individuals given the responsibility to steer the company,” the committee says in the report.

“In that regard, the committee is unanimous that those decision makers must be held to account for the sorry state of affairs in which the company now finds itself.”

Attempts by the Business Daily to get a comment from KQ were not successful as they had not replied to our queries by the time of going to press.

Mr Clarke, 52-year- old Irishman, whose duty was ensure the airline generates sustainable revenue, quietly resigned in October, exactly two years since he took charge of the critical management position.

Mr Clarke joined Kenya Airways in October 2013 from Hong Kong Airlines (part of China’s Hainan Airlines Group) where he was the managing director for United Kingdom and Europe route.

He has previously worked at the International Air Transport Association (IATA), leading Middle East carrier Emirates Airline as well as West African carrier Arik Air among others.

Mr Clarke’s duties at KQ included sales, pricing, revenue management, scouting for and entering into partnerships like code-sharing agreements, new product development as well as planning new routes among others.

At the time of joining KQ, the airline’s revenue for the half-year to September 2013 stood at Sh54.3 billion, up from Sh49.8 billion while its net earnings had improved to Sh384 million from the previous year’s Sh4.78 billion net loss.

This performance was recorded under the watch of Mohan Chandra who opted not to renew his contract once it came to an end, giving way to Mr Clarke’s appointment.

During Mr Clarke’s first full financial year as commercial director (March 2014 – March 2015), KQ’s revenues increased by 3.9 per cent to Sh10.2 billion but earnings dipped 661.2 per cent to a record Sh25.7 billion net loss.

In the half-year to September, the net loss worsened by 14.4 per cent to Sh10.95 billion. Revenues remained flat at Sh56.7 billion, a direct effect of the airline selling of some of its aircraft during the period.

READ: KQ pays top three executives Sh95m in year of record loss

KQ this year engaged New York-based Seabury to evaluate its sales, ticketing and network planning functions as it sought to get its main revenue stream back on sound footing.

The consultant has since helped implement a “major price restructuring” at the airline which Mbuvi Ngunze, KQ’s chief executive officer, says will help the company compete better in the market.

“The long-term capital raising conversation is happening right now with our shareholders. Discussions include whether it will be equity, debt or a mixture of both,” Mr Ngunze said during the release of the airline’s half-year results.

But even as KQ implements the changes, the government, which is a major shareholder in the carrier, and the senate is still keen on having the top managers exit the NSE-listed airline, accusing them of making unsound business decisions.

The Treasury has already disbursed Sh4.2 billion to the airline but Mr Rotich says some managers need to exit before the release of a long-term bailout package said to be in the region of Sh60 billion.

Additionally, the government has provided support to KQ to access a Sh20 billion bridging facility from Afreximbank for working capital, half of which the airline has already spent.

“We need to know what caused the loss before having the managers resign,” Henry Rotich, the Treasury Secretary, told the Senate legislators during a September hearing.

The Senate, which has been probing KQ for four months, on Thursday approved a report which supports the Government’s pre-conditions and recommends that KQ managers be held to account before any financial assistance is offered.