Why CS Henry Rotich will not sack top Kenya Airways’ managers, for now

National Treasury CS Henry Rotich makes a point when he appeared before the Senate Committee investigating the performance of Kenya Airways at Parliament Buildings Tuesday. [PHOTO: MOSES OMUSULA/STANDARD]

NAIROBI: Senators have accused Kenya Airways’ management of colluding with travel agents to fleece the airline through fraudulent ticketing.

They also demanded total overhaul of the airline’s board and management for running down the once giant airline including sacking those responsible.

Senators Anyang’ Nyong’o (Kisumu), James Orengo (Siaya), Prof Nyongo, Wilfred Lesan (Bomet), Daniel Karaba (Kirinyaga), Billow Kerrow (Mandera) and Mutahi Kagwe (Nyeri) were in agreement that the top managers of the national carrier were complacent in the ticketing puzzle, which has been cited as a major avenue through which the revenues were getting hemorrhaged.

However, although Rotich conceding that the airline was in trouble, he reckoned that it was co-owned with Royal Dutch KLM and the IFC.

He added that Treasury could therefore not act on emotions but deal with the matter systematically.

The CS said that the State was actually concerned the airline was getting a small proportion of the ticket sales over time, which had the twin effect of making KQ uncompetitive when compared to rivals, while in the real sense, it was agents who were keeping all the profits.

“We have made it clear that restructuring in the board and management must happen but we cannot work on emotions – that people must be sacked in cases where the business has made big losses like this,” Rotich said. He was responding to a demand by Kagwe that the management who oversaw the fall of the airline should have been sent packing by now.

In the alleged conspiracy, the Senators noted that the travel agents were retaining most of the ticketed amounts and passing on a tiny portion to the airline that is faced with insolvency.

TICKETING WOES

Senate select committee probing the troubles of the airline chaired by Senator Nyong’o said the ticketing woes could only be deliberate, while the wider problems were actually self-inflicted.

“With the size of bailout, we want to see serious steps taken including commitment on the part of the principle shareholders,” said Kagwe.

“We have demanded action on ticketing and revenue management,” explained the CS, adding that sacking of top officials of the airline out of emotions was an option that the State could not afford to take.

“The chairman of the board of directors of KQ, its managing director, finance director and chief operating officer should not be in office,” Kagwe said. Nyong’o’s committee yesterday grilled National Treasury Cabinet Secretary on what he was doing to deal with those responsible for the dwindling misfortune of KQ as his office represents the State in the airline’s board of directors.

Orengo also took issue with the high fares charged by KQ yet the company records indicate decrease in costs. “There are underlying problems like staffing and the management we must deal with. We have already identified the gaps in revenue through the technical and commercial departments and zeroing in through the restructuring process. We have now given conditions on the expenditure of the Sh4.2billion loan,” said Rotich.

He told the senators that the State was considering converting the Sh4.2 billion it lent to the airline in June to equity, as the first step in stopping the bleeding of KQ. Another credit facility sought by the firm worth Sh20 billion from the Afro Exim Bank was also guaranteed by the National Treasury.

“There is obvious conflict of interest and collusion in the ticketing,” Nyong’o said, supporting his claim with two ticket purchases to Dar es Salaam, both bought last month. In the first incident, he said a return ticket which he bought himself from a Nairobi agent cost him Sh43,260 ($420).

While a second ticket paid for by a South African University that had invited him to give a talk in the Tanzanian City cost Sh29,767 ($289).

From the two purchases alone, the difference in price is Sh13,493, which would not be conceivable as being an ordinary variance within a two-week period.