Friday, 7 December 2012

Kenya: How KQ Used Communication to Confront Crisis

(copied from)
It is one week and a few days since a Kenya Airways aircraft Boeing 737-800 heading to Nairobi, crushed into a think forest in Douala, Cameroon. By press time last week, only 80 bodies out of 114 had been recovered. Business Week’s BEN MOSES ILAKUT talked to KQ, Uganda Country Manager, Mr Daniel Maundu about the crisis and future of the region’s best performing airline. Below are excerpts:
How is the airline coping with the recent tragedy in which one of your aircrafts crushed killing all people on board?
It was an accident that we least expected. What we are doing now as a customer sensitive company is to communicate to all affected persons.
We set up a media centre at the Panari Hotel in Nairobi to communicate on the crisis immediately we learnt of the disappearance of the plane.
Our CEO Mr Titus Naikuni has since then had to update the public, the media and relatives on the latest developments after every three hours.
The President of Kenya Mr Mwai Kibaki was briefed by KQ managers on what was being done to address the post crisis situation. At this point communication is very important.
Other than communication what else are you up to?
We have gone further and set up five crisis centres.
There are three in Nairobi because it is the headquarters of the airline. Most of the passengers were on transit hoping to connect from Nairobi to other destinations. One centre is at the Intercontinental, another one at our headquarters in Embakasi and the other is at Jomo Kenyatta International airport.
The other crisis centres are in Johannesburg, South Africa and Douala Cameroon. In all these centres we have people working 24 hours with dedicated phone lines to attend to all affected persons. We have hired psychiatrists to receive relatives of the affected and take them through counselling, because they are traumatised by lose of relatives.
As we continue to communicate we also have to facilitate those who want to travel to the scene. Two nominated relatives of each of the deceased or next of kin are being facilitated to visit the scene. We will provide tickets, visa, accommodation and food for at least a week for kinsmen coming from any part of the world. Of course they have to be vetted by the crisis centres.
The centres have also become the official communication offices. Successful companies are increasingly being judged by how they communicate and how they manage crisis-it’s the biggest test.
What should your clients and well-wishers out there expect?
It’s business as usual now; we would like to assure the public that KQ is one of the only two IASO (International Operation Safety Audit) recognised airlines in Africa. And this is the highest recognition an airline can get in terms of safety.
Our commercial operations to Cameroon have continued, since then. Cameroon is a very critical, market for us because we fly to two cities; Douala and Younde.
We want to assure them that safety is supreme to us and we don’t compromise on it. We have in the past, for example, staked and lost [invested] millions of dollars to divert flights from Nairobi to Mombasa or Entebbe because of the early morning fog in Nairobi.
We have delayed flights for hours whenever we are not sure about even the slightest internal or external conditions. That means we have spent money to re-book passengers into hotels, pay for food and a few minutes of airtime and we will continue to do that. To us that is part of the business.
The crushed aircraft was one among three that were brought in December last year and was just beginning its sixth month of operation and has had no incident. In Cameroon it was delayed for one hour because of bad weather, before being cleared later.
Can you summarise Kenya Airways’ performance, particularly on the Entebbe- Nairobi route over the last quota?
Our financial year is April to March 31. We are soon publishing the performance results but generally we have been growing in the last three quarters of the year.
The passenger numbers have been growing at a rate of about 15% every year. Last year we broke the 2 million passenger mark because of the expansion.
What are KQ’s expectations; what new strategies do you have in place to achieve these expectations?
We will continue the growth trend. Later this month we are getting a new fleet of three Embraer 170 Jets, with a seating capacity of 72.
They are expected to help expand the domestic routes. The Embraer will replace the SAAB A340′s which will be retired from the Kenya Airways Fleet.
We are continuing to modernise, bringing in fleet that is fit for our business requirements. The network expansion will also continue. Recently we launched the Nairobi- Paris route and a number of other routes have been brought on board.
We added the Comoros Islands in the Indian Ocean. In West Africa we have Cotonou, the capital of Benin and Monrovia in Liberia. In West Africa alone we now reach 11 destinations from nine previously in just one year.
In East Africa we have grown the list to nine points by three additions, notably Mauritius, the Comoros Islands of Moroni and Hahaya.
In Southern Africa we fly to six cities, in Northern Africa we fly to five routes. Of course we also fly to Asia, the Middle East, and Europe and operate domestic flights to Lamu, Kisumu, Malindi and Mombasa.
There is a general feeling that the Entebbe Nairobi route is overbooked most of the time, and that suggests low capacity. What is your take on this observation?
Let me explain how timing plays a role in the level of booking and pricing.
The 5:00am flight for example is crucial to many passengers because they are keen on catching their early morning connecting flights. The 3:00pm flight also crucially connects early evening departures, so you find them fully booked.
Similarly towards the weekend, especially Friday and Sunday, the bookings go up because social travel within the region peaks, so again there is tendency of full booking.
The 10:30 and 2:10 flights, however, are under booked during the week and you find many empty seats in the aircraft.
That is the only way you may view the capacity issue. It affects only peak hours. There is, however, a lot of room for clients to exploit day time flights because they get special rates.
Your passengers also complain of high cost. They say the Entebbe-Nairobi Route is the most expensive of all KQ operations. How would you explain that?
The fair from Entebbe to Nairobi has two components; namely the fair itself and the taxes.
Seven months ago, our lowest fair without taxes was US$225, now the lowest is $199. So you can see the reduction margin. Including taxes it was $315 and now is $289.
The other thing about fares is that they are not fixed.
We offer a spread of fares depending on the time of the day and the situation at booking time. When the booking is heavy, the fare becomes more competitive and when booking is low, competition goes down.
That means clients can benefit from discounts. KQ carries passengers to 44 destinations and so they are not necessarily Entebbe Nairobi passengers.
If for example we were flying strictly Entebbe- Nairobi, the fares would be extremely high. So it is not just a matter for Entebbe-Nairobi. Fares are mainly determined by operational costs like servicing, fuel etc.
What is KQ’s position on the single sky project?
The single sky project is more of a national/country project than the airline project.
KQ as a player will support any treaties that the Kenya government signs. Each country normally signs Bilateral Air Service Agreements, which determine how many times a flag carrier flies into another country.
As KQ, we will advice KAA and government on which bilateral agreements we should enter to foster business
What plans do you have for the Common Wealth Heads of Government Meeting (CHOGM)?
CHOGM is a great opportunity for Uganda and East Africa as a region. We definitely welcome it.
We are positioned well to bring in delegates and fly them back to their respective destinations. KQ covers most of the Commonwealth in Africa. We will also bring in other delegates from Europe, Asia. We will have to increase our capacity of aircraft and readiness. We are prepared to deploy enough aircraft depending on the demand. We will be flexible.
You are the official airline for the e-Leaning Conference at the end of this month in Nairobi, how come?
Conference tourism has been on the increase in East Africa, Nairobi has increasingly become a conference tourism destination.
The overall picture of benefit to the region motivated us to offer discounted rates to participants as long as the conference organisers introduce them to us.
It is under that policy that the e-learning conference is benefiting a 10% discount on all tickets to persons introduced to us by the organisers.
from other sources
Kenya Airways plans to lay off an unspecified number of employees in a restructuring process to cut costs in the face of declining profits. The company sent out a memo offering employees a voluntary early retirement option.
The process affects employees in its seven departments namely IT, commercial, finance, flight operations, ground operations, human resource and technical. According to its 2011 – 2012 financial statement, Kenya Airways has 4843 employees. One of the employees who did not want to be named said the memo gave them 10 days to take up the exit offer, while a full list of those retrenched will be released on by end of August.

The airline’s corporate communications manager, Chris Karanja, said it is an internal process declining to share the targeted number of employees of the estimated cost saving the company intends to make. “It is an issue of cost. We have seen declining revenues, based on that we are doing a restructuring exercise,” Karanja said on phone.

In the last financial year, KQ’s profit after tax dropped by 53 per cent from Shs. 3.5 billion in 2010/2011 to Shs. 1.7 billion. The carrier attributed the drop in earning to high operation costs especially fuel expenses and the negative impact of the Eurozone crisis, but no mention was given to the staff costs.

“This is voluntary retirement exercise, the communication has been sent out” said Mr. Karanja. The retrenchment is a further step for the listed company to reduce the number of employees, as it has also decided to outsource cabin crew employees for its upcoming low cost carrier, Jambo Jet, to a human resource firm.

The Aviation and Allied Workers Union which represents the airline’s workers said it had not been informed on this in advance which is likely to cause fresh conflict with the KQ management. By last evening, Nicholas Baraza, the AASU secretary general said he had not received any official communication on the matter.
Monday, the 3rd of December 2012 - National carrier Kenyan Airways has issued a quick reply to a ruling delivered earlier today by the Industrial Court sitting in Nairobi that ordered the immediate reinstatement of 400 employees who had been laid off as part of the airline’s restructuring programme.

In a brief statement signed by Kenya Airways Group Managing Director and CEO Titus Naikuni, the airline said that it has taken cognizance of the court’s ruling and will issue an official reaction to it once it has conferred with its lawyers;

“In relation to the ruling made by the Industrial Court sitting in Nairobi today on the issue of staff rationalization, Kenya Airways wishes to confirm that it has been made aware of the court’s decision. However, our lawyers are studying the ruling and its implications. We shall advice on the next steps in due course.”
ational carrier Kenya Airways (KQ) has revealed that it will give each of their staff affected by the rationalization exercise and voluntary early retirement a layoff package of up to Kshs 2 million.
The staff rationalization which has caused upheaval among the workers is the company’s venture as it plans to save Kshs 1.2 billion annually on labour costs and channel the funds to its expansion plans.
For the next seven months, the airline company is importing new small aircrafts with the large ones expected latest by 2014.
The Group CEO Titus Naikuini said on Thursday that 126 workers of the estimated 600 members of KQ staff that will leave the airline voluntarily were willing to take up the 2M payout.
“126 workers have agreed to go for early retirement and those leaving the company will have an estimated average pay-out of up to Ksh. 2 million,” said Naikuni at Serene Hotel.
Kenya Airways plans to triple the number of aircraft from the current 35 in the next 10 years. The company is planning to take bank loans to finance the 10-year expansion plan that will cost $ 3.6 billion US dollars in the first five years.
“To achieve this growth, the company has looked for ways to cut down costs and it has planned to outsource some of the activities which the board thinks can be done better by individuals outside the company. The laying off of workers is part of the strategy,” said Naukuni.
“The voluntary early retirement programme as well as staff rationalization exercise will arrest internal inefficiencies and reduce employee cost base of Kshs 13.4 billion by 10-15 per cent.”
Global financial crises in 2008 and 2009 besides the Eurozone debt crisis have adversely reduced travel demand globally. This, according to KQ boss, have affected the company’s revenue, coupled with the the doubling figure of its employees in the last five years.
“Compared to 2009, our employment costs have doubled and we are paying Kshs 13.2 billion as salaries to workers this year. Our revenues have been stagnant and we have even been forced to renegotiate contracts with the people we are outsourcing services from,” said Naikuni.
He added that the company was working with International Air Transport Association (IATA),  an international trade group of airlines, to advice the company on matters like pricing, fuel usage as a tool of lowering costs.

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