KQ finance chief bows out amid financial storm

Mr Alex Mbugua helped steer firms to success, but at KQ, a turbulent financial ‘flight’ proved too tough. PHOTO | FILE 

By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com

When Kenya Airways’ ambitious expansion plan dubbed Project Mawingu took to the skies in 2011, Alex Wainaina Mbugua was the “first officer” while Titus Naikuni was at his right hand side —the “captain” of the “aircraft”.

The plane was to usher the airline into a thriving era by growing the number of destinations from the then 57 to 115 in a decade, supported a beefing up of its fleet from 34 to 119.

However, the plan flew into turbulence soon after take-off, rattling its Business class passengers (KLM and the Kenya government) and regular shareholders riding in Economy.

Mr Mbugua, Kenya Airways’ (KQ) chief financial officer at the time, chaired the strategic planning committee that developed the project, and presided over the capital raising for the project which needed a whopping $3.65 billion in the first five years.

The expensive debt-financed fleet modernisation plan has since straddled the airline with huge liabilities, mostly from banks, that as of September stood at Sh167 billion.

Depressed demand to destinations like Europe (partly due to insecurity and the resultant travel advisories), saw the airline execute a route rationalisation plan where it pulled out of unprofitable routes.

This retraction chipped away at the grand plan of launching three routes per year and an ultimate goal of operating a sizeable fleet that included 32 Boeing 787s by 2021.

Huge fuel hedging and forex losses, a runaway wage bill, terrorism attacks and increased competition from other carriers all colluded to further unnerve Project Mawingu.

The 20-page PowerPoint presentation of the plan, which KQ’s management had pitched as “robust and based on sound business projections” was proving a lot harder to implement outside the boardroom.

“Originally, when we were putting Mawingu together, the expected uptake from a passenger perspective was much better than reality has turned out to be,” Mr Mbugua told a Senate committee probing the airline in August 2015.

The beating showed: KQ’s full-year net profit halved to Sh1.7 billion in the year to March 2012, followed by a Sh7.86 billion loss in 2013 and a Sh3.38 billion loss the year after that.

Former KQ chief executive Mr Naikuni parachuted off the plane in November 2014, preferring the more predictable life of rearing cattle to the dial-filled cockpit.

In the half year to September, the national carrier reported a Sh11.95 billion net loss and that its negative equity position now stands at a staggering Sh33.9 billion.

A recent sale of some aircraft lowered KQ’s operating costs by Sh8.3 billion to Sh58.9 billion and improved its operating loss position to Sh2.18 billion from the previous year’s Sh10.5 billion.

At a November 12 investor briefing to announce these earnings, Mr Mbugua was still exuding optimism despite having stood at the same podium for three years in a row to announce dismal results.