Corporate News
By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com
In Summary
Kenya Airways
has terminated an 18-month contract it had signed with global
consultancy McKinsey as the airline's turnaround plan enters its final
phase.
The national carrier, known as KQ by its international code,
hired McKinsey to help implement about 400 cost savings and revenue
generation initiatives for which the US firm was to earn
performance-based fees.
Micheal Joseph, KQ’s chairman, now says that the
airline has reviewed this “performance-based” contract after one year
and will instead buy services from McKinsey on-a-need basis depending on
availability of resources.
“At the Board meeting held on Thursday, and at my
request, we agreed to change the contractual relationship we have with
McKinsey going forward,” Mr Joseph said during a press update on KQ’s
operations Friday.
“We have, by mutual agreement (with McKinsey),
agreed to stop this contract and turn to a new one where we pay for
certain expertise that they offer and which we still need at KQ on a
time and material basis,” he added.
Mr Joseph said this contract revision was adopted
at Thursday’s Board meeting, adding that all continuing turnaround
initiatives are being handled by KQ employees even as management
negotiates a new arrangement with McKinsey.
Termed “Operation Pride”, the 24-item strategy the
airline drafted included elements such as review of prices, revenue
management, sales, cost reduction and cash and financial optimisation
among others.
Mr Joseph said that this plan is now 55 per cent complete.
Come under scrutiny
The airline, which has reported successive
full-year losses for the four years to March 2016, was also expecting
Sh14.6 billion from sale of 30 acres of land in Embakasi and the
disposal of aircraft.
KQ’s arrangement with McKinsey has come under sharp
scrutiny following media reports that the struggling carrier has paid
the consultancy firm upfront even before delivering on its objectives.
Mr Joseph, who has been the airline’s chairman for
about 100 days, and KQ chief executive Mbuvi Ngunze both declined to
expound on the specifics of the contract citing confidentiality
considerations.
“We still have to negotiate the exact terms of the
new contract. I however think the best way would be to terminate the old
one and get into a new one. We shall finalise that change soon,” said
Mr Joseph.
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