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Kenya Airways' executive pay rises 33pc in year of Sh3b loss [Business Daily (Kenya)]
[August 19, 2014]

Kenya Airways' executive pay rises 33pc in year of Sh3b loss [Business Daily (Kenya)]

(Business Daily (Kenya) Via Acquire Media NewsEdge) Top Kenya Airways executives' pay rose by one third in the past financial year, defying the multi-billion-shilling loss that the airline reported in the same period, the just released financial results show.

Outgoing chief executive officer Titus Naikuni's and finance director Alex Mbugua's pay jumped 33.7 per cent to Sh103 million last year even as the airline stayed deep in the red with a Sh3.3 billion net loss.

A total annual take-home of Sh103 million means the duo's monthly pay package rose to Sh8.5 million, up from the previous year's Sh6.4 million.

It is not possible to determine how the money is shared between the two executives although Mr Naikuni is expected to take a larger portion.

Kenya Airways made a net loss of Sh7.8 billion loss in 2012, making last year's Sh3.3 billion loss a 57 per cent improvement. Mr Naikuni and Mr Mbugua are listed as the only executive directors who sit on the Kenya Airways board.

The financial results for the year ended March 2014 show that KQ, as the airline is popularly known, rewarded its top executives more robustly than the rest of its employees whose average monthly wages rose 18.2 per cent to Sh328,812 from Sh269,845 the previous year.

The airline's 3,889 employees (representing a slight drop in the staff count from the previous year's 4,006) earned a total of Sh15.3 billion in the 12 months ended in March.

The total pay for KQ's employees stood at Sh12.9 billion in the year ended March 2013.

Mr Naikuni and Mr Mbugua's pay increment stands out because 2013 was the second consecutive year that KQ shareholders missed dividend payouts as the airline sought to weather turbulence in its operations and stayed in the loss-making territory.

KQ has in recent months been pursuing an ambitious expansion plan that has seen it chalk up multi-billion-shilling debt that is expected to further weigh down its earnings in the current financial year.

KQ last declared a dividend of Sh0.25 per share for the year ended March 2012, when it made a Sh1.6 billion net profit. The airline's stock has gained nine per cent in the past 12 months and closed yesterday's trading at Sh9.80.

READ: Kenya Airways posts Sh7.8bn loss on reduced passenger numbers Executive pay is a hot subject globally over which shareholders and management have fought epic battles in recent times.

Corporate governance experts say remuneration of executives should be an important yardstick against which shareholders, especially in public listed companies, can assess the performance of senior management.

Most corporations use salaries, stock options, and allowances as incentives for retaining top talent and driving management performance.

Some analysts believe the huge pay increase that Mr Naikuni and his finance director got despite the poor outcome points to the fact that their remuneration is tied to key performance targets that are not necessarily linked to the bottom-line.

KQ's turnover, which could be one of the top executives' performance measures besides profitability, rose 7.2 per cent to Sh106 billion in the year ended March.

That growth in the top-line could not, however, cover the finance and operating costs that stood at Sh2.4 billion and Sh108.7 billion respectively.

Human resource surveys by advisory firm PricewaterhouseCoopers (PwC) have consistently pointed to scarcity of top talent in the Kenyan and East African markets that it says has become a key driver of executive pay as companies battle it out for the few experienced workers.

Mr Naikuni is set to retire from KQ in November but will remain an active member of Kenya's corporate movers' club having been recently appointed to chair the Rift Valley Railways (RVR) board.

RVR, which operates the Kenya-Uganda railway, said it picked the 60-year-old airline executive for his experience in the transport sector.

For KQ, the jump in executive compensation despite the huge loss-making could be a signal that the board views the airline's performance as being driven by external factors outside the management's control.

KQ has recently faced a number of setbacks, including travel warnings that the US and some European countries have issued to their citizens in the wake of rising insecurity in the country.

Such challenges have seen the airline's revenues grow at a slower pace compared to its costs, leading to the losses. KQ, however, plans to expand its fleet significantly in the short term, a move that is set to further pile pressure on its margins due to higher financing costs.

The airline is investing Sh87 billion in the current financial year to acquire more aircraft, which is expected to raise its interest rate burden that stood at Sh2.4 billion in the year ended March when it had racked up Sh89 billion in short- and long-term debt.

(c) 2014 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (

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