Lol, damn, maybe it was a bit too hard.
It's a columnar transposition cipher; it requires you to shift the letter columns and the most top row is the key.
Unscrambled it looks like this:
K E Y
H A P
P Y C
And the columns are then shifted according to the alphabetical order of the letters in the keyword (in this case KEY becomes EKY).
Here's the puzzle again:
E K Y
A H P
Y P C
And thus the answer is HAPPY(C). C is a null character added just to fill the column.