Effect of Turnaround Strategies on the Performance of Kenya Airways

Abstract

Kenya Airways has been posting losses as follows: 2013 (KSH 9 billion) and 2014 (KSH 2.7 billion), these losses can be attributed to a high wage bill, increased operational costs, stiff competition from other carriers, travel advisories and mismanagement. The decline in performance could be a result of situations specific to the organization or industry. In situations where organizations with great potential and likelihood of turning around their misfortunes to emerge profitable are identified, turn around strategies could be instituted to help stabilize its operations then turn around to positive performance parameter recordings. The study was directed by two objectives which included: identifying turnaround strategies at Kenya Airways and establishing the effect of turnaround strategies on the performance of Kenya Airways. The study was anchored on the Resource Based View Theory, institutional theory and the Open Systems theory. This study used descriptive research design to identify and describe the turnaround strategies that impact on organizational performance. It collected primary data using an interview guide. Data was analyzed using content analysis. The study concluded that the decline in performance at the Airline was as a result of poor ticket pricing and distribution channels which made customers prefer competitor airlines; poorly thought out investment decisions especially capital investment decisions which tied up much of the Company’s revenue and cash flow; poor routing arrangement and entering into some partnership which were not beneficial to the Airline; and existence of poor human resource management policy and practices which led to frequent industrial unrest to the detriment of Company reputation. On cost management strategies, the study established that the Airline reduced its fleet size so as to reduce unnecessary operating costs on fleet. The Airline also reduced the head count of its staff from over four thousand to below three thousand six hundred. The study further established that the Airline engaged in managerial changes where top key senior managers were replaced. This led to better strategy formulation and implementation to enhance turnaround strategy implementation. The study also concludes that the Airline engaged in culture change where employees were re-oriented to Airline vision, goals and the way that they needed to ensure this is achieved. The study recommends that revenue improvement strategies also be introduced in the operations so as to extend Airline revenue and improve overall profitability. The study recommends that this exercise be continued until the point of stabilization. This will enable the Airline in offloading unnecessary balance sheet items for improved profitability. This study further recommends that new culture developed on the basis of retraining and work place diversity be promoted to sustain operational efficiency. This will improve the future performance of the airline.