Senate orders audit of KQ financial reports

The Senate Committee of the Inquiry of issues facing Kenya Airways (KQ) has ordered for an audit into KQ’s financial reports, specifically on its hedging policy, purchase of Dreamliners and projections of growth in revenue and passenger numbers.

The committee wants to ascertain the validity of the projections that were under the Project Mawingu expansion plan.

Speaking on Wednesday when Deputy Auditor General Alex Rugera appeared before the committee, Committee Chair Anyang Nyong’o ordered Rugera to give a comprehensive audit report.

The committee chair said that they also want an audit of KQ’s decision to retrench 500 employees in 2012 and outsource cabin crew thereafter.

In August, the Senate select committee blamed the firm’s management for investment decisions that plunged it into record losses.

Preliminary findings by the committee chaired by Kisumu Senator Prof Anyang Nyong’o showed the firm slid into the red following a series of management blunders that also set KQ on a collision course with employees.

The team was tasked with probing the leasing and buying of aircrafts and unmasking individuals behind two offshore companies that allegedly bought aircrafts on behalf of the loss-making carrier

The committee said that evidence so far gathered points to poor investment decisions when buying and leasing aircrafts, as well as fuel hedging.

In a statement signed by the select committee’s chairman and Nyong’o, the team faulted KQ’s management for expensive ticketing which has led to loss of passengers and revenue.

Also faulted is routing arrangements and partnerships which may account for massive losses of revenue, particularly due to lack of expansion of KQ flights in the African routes.

Other issues identified as problematic are human resources policies and practices causing industrial unrest, as well as frequent cancellation of flights that have caused inconvenience and poor relationships with passengers, who consequently abandon the airline.

In July, Kenya Airways reported a pre-tax full year loss of Ksh 29.7 billion for the year ended March 31st, 2015.

KQ further posted a Ksh 25.7 billion full year loss after tax, this being the biggest loss posted by a listed company in Kenya.

The airline Managing Director Mbuvi Ngunze attributed the loss to the slowdown in the tourism industry and the high costs of fuel.

The Airline made a loss of 4.8 billion shillings last year.

The airline also attributed the loss to low ticket sales leading to cancellation of flights, flat revenue growth and increased overheads.

This in turn cost the carrier more as they put up customers whose flights had been cancelled in hotels.

In March this year, Kenya Airways was set to retire ten of its pilots as part of its fleet modernisation.

Kenya Airways Corporate Communications Manager Wanjiku Mugo said the airline had issued retirement letters to the ten pilots in accordance with the airline’s collective bargaining agreement with the Kenya Airline Pilots Association.

The announcement came months after the airline announced that it had sold its fleet of four Boeing 777-200 aircraft at a loss of Ksh5.4 billion owing to the depreciation in the value of the aircraft.

During the first six months of its financial year, Kenya Airways announced that it had made a net loss of Ksh10.4 billion that it blamed on slowed revenue growth and increased fleet operation costs.