Kenya Airways chief executive Sebastian Mikosz during the airline’s 2018 full year results on April 30. FILE PHOTO | NMG
Sebastian Mikosz, the Polish expat headhunted to turn around Kenya Airways, could not accept defeat.
He
could not wait for Parliament to hand in its verdict and opted to jump
out of the financial disaster that is Kenya Airways. Insiders say his
mode of operation left no doubt that it was either his way or the
highway.
KITCHEN CABINET
With
Parliament not fully convinced to hand him everything on his wish list,
he appears to have settled on the only way to send the strongest
message.
Mikosz is not the type of captain who sinks with his ship. Caught between a rock and a hard place, he jumped.
Mikosz,
who speaks fluent French, English and Russian in addition to his native
Polish, was appointed in 2017 and was seen as the fresh pair of hands
that would stop the national carrier’s loss-making streak, largely due
to his experience turning around LOT Polish Airlines, the flag carrier
of Poland.
But with his resignation, the loss-making
airline has destroyed another chief executive officer. He follows in the
footsteps of Mbuvi Ngunze, another CEO who also fell by the wayside.
Insiders say Mr Mikosz dug his own grave after he sidelined top managers who would have been critical to his reign.
Scorned,
these managers chose to sabotage every step he made, leaking his every
strategy before it fermented. The six polish expats he flew in with him
have further helped isolate him from the rest of the team at the
airline.
A
source says Kenyan managers felt frustrated after they were asked to
run any idea they had on turning around the airline through the Polish
kitchen cabinet, before pitching it anywhere else.
A
powerful board chairman in Michael Joseph did not help his desire to
centralise power and decision-making so as to whip everyone into shape
and implement his strategy without glancing over his shoulders.
And
when his decision to resign was tabled, the airline’s board was split
down the middle; three in favour and three against. It was the board
chair who would break the tie, in a decisive vote that saw the board
accept the resignation.
FEW OPTIONS
When
he visited the Nation Centre on Thursday last week, Mikosz sounded like
a hunter who had missed all his shots. Despite carrying the weight of
the airline on his shoulders, he did not look defeated. He cut the image
of a man who was crying more than the bereaved, and was wondering why
it was difficult for Kenyans to see just how few options they had been
left with to rescue their national flag carrier.
“No
one including myself is a miracle man. It is not the CEO that is
turning around the airline. He is only leading the direction, but then
everybody around must want to turn around the airline,” Mr Mikosz said.
“You
cannot make an airline profitable in one year. Unless you allow me to
go outside the law, then it is not possible,” he said.
His
message was clear: Kenya has no option but to hand him the assets of
Jomo Kenyatta International Airport (JKIA), in an amorphous deal that
would effectively turn KQ into a state parastatal, and even delist from
the Nairobi Securities Exchange (NSE), to give it the ammunition and
equal footing to stop Middle East carriers and other regional
competitors from eating its lunch.
He said the airline had come out of the publicised restructuring deal with its lenders empty.
“I
came in when the airline was finishing a very significant financial
restructuring. So when I joined the airline, I was concerned with what
was going on,” he said.
“The
restructuring was a very sweet deal for everyone except KQ. Banks,
lessors and all other parties all got something but the restructuring
did not help solve the financial problems of the airline,” he said.
PARADIGM SHIFT
He
said the government saved the airline from going into bankruptcy by
giving it a sovereign guarantee that allowed it to turn its creditors
into shareholders by converting their debt into equity.
He said his strategy was based on three principles — cost-cutting, growth and the deal with JKIA.
“On paper, turning around the airline is extremely simple. You just cut the costs,” he said.
He added his first strategy was to stop the airline from shrinking any further.
“I
do not believe that you can turn around the airline by shrinking it.
KQ’s market situation is really detrimental and we keep losing market
share. We needed to change the paradigm from an airline that is not
growing to one that is growing,” he added. He says that is why he
refused to sell any more assets of the firm.
“When
I came, everyone was telling me sell this, sell that, sell this you
will have cash. But when you start selling the company, it never stops.
You have to use the assets that the company has to make money,” he said.
He said at the time, everyone was convinced that the airline should not buy any more aircraft or start any new destination.
“Let us just stay silent in our corner and nobody will notice it,” he said of the situation back then.
The other decision he had to make was around costs and this, he said, made him very unpopular at the airline.
MAIN COMPETITORS
“These
are the most unpopular decisions you can make because it creates a
resistance that partly has contributed to leaking of information. This
airline is like an open box, the more I put something in secret on
paper, the faster it gets out,” he said.
The JKIA deal, he further added, completely went out of control.
“You
cannot grow and have a sustainable airline if all your competitors are
state-protected and your mandate is to get dividends,” he said.
He
argued that the ground for Kenya Airways is made uneven by the
shareholding structure of its rivals. Its main competitors — Ethiopian,
RwandAir, and the three Gulf carriers — are all 100 per cent
state-owned.
This means that to compete them, KQ would need the kind of muscle that only governments can offer.
The
Kenya Airports Authority (KAA) did not help after it questioned the
financial viability of the deal given that KQ was the firm in the
doldrums. Unions have never been on its side. They have also been
demanding for the removal of the CEO and his management team.
Instead
of focusing on the turnaround strategy, Sebastian found himself having
to explain just how much he and his expats earned.
Mikosz
says when he came in, he did a humility test to know why his
competitors, among them Emirates, Qatar, and Ethiopian airlines were
doing well when KQ was hurting.
NO DIVIDENDS
“I
asked myself: What do they do that I do not or what do they have that I
don’t? The first thing I noticed is that they have a different purpose
of existence.”
He said he was torn
whenever he arrived at the airline’s annual general meetings and
shareholders kept asking him why he had no dividends for them.
“You
are asking dividends from a company that is in negative equity for the
past five years; you want dividends from a company that needs to invest
for the next ten years every penny it makes to catch up with the
competition and also run away from arriving competition,” Mikosz said.
It is this reason that saw him push for the JKIA deal, asking the government to buy it.
“That
is why I am asking for the same instruments the competition has.
Basically, create a system in which state-owned assets are not competing
but co-operating and functioning in a cross-subsidising principle,” he
said.
He, however, said the plan was
never to take over the airport but rather to just enter into a
partnership that would see the balance sheets of the two entities
combined into one. He said he hid nothing from the public and it was
just a case of the news being leaked too early before the process
actually began.
NARROW LOSSES
“After
Cabinet approved the PPP and we started the next phase, submitting it,
we were accused of hiding it. The moment we sent the proposal, everyone
went up in arms and we were accused of all manner of things including
how a crooked deal it was,” he said.
On
Friday, he threw in the towel and informed staff that he had made the
decision to shorten his contract term and resign on personal grounds
effective December 31.
“It is my
personal decision and I have obviously discussed it with the board as
well as my family. I believe that this is the ideal timing to begin a
transition process to find someone who will continue with the turnaround
initiatives that we began three years ago,” Mikosz said in the memo to
staff.
He said he will in the remaining seven months continue delivering the improvements that he has been executing.
His
quick wins include finalising the deal that saw banks convert their
debt into equity, lifting a repayment burden that was choking its cash
flows. He also counts the direct flights to the US started by the
airline as another feather in his cap.
The airline has managed to narrow its losses from a historic loss of Sh25 billion in 2014 to Sh7.5 billion.
No comments :
Post a Comment