Kenya Airways ‘too big to fail’ and must be supported

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BY MACHEL WAIKENDA

The most depressing moment for Kenya in the last week was news that national carrier, Kenya Airways, had made a loss of Sh25 billion. This is arguably the largest loss made in a year by any company in Kenya.

This kind of loss was unexpected, unprecedented and such news from the airline whose slogan is “The Pride of Africa” is unacceptable. Kenya has little to be proud of on the airline at the moment – a moment that we hope will disappear soon.

The outrage that has followed the declaration of this record loss by Kenya Airways is understandable as Kenyans expect better. It has left all of us with key questions that must be answered even before we dare think of pumping more public funds into the airline to save it.

We need to know what the Kenyan Airways management has done over the years to forestall such an occurrence. Even more critically, we must examine whether there was commission or omission on the part of the management leading to such a huge loss.

Can a slump in tourism result in such a huge loss? Can the cancellation of flights to Western Africa lead to such a huge loss? Was there a plan to deal with such eventualities? Does Kenya Airways have a business model flexible enough to wriggle itself out of such eventualities?

These are some of the questions that we must seek and get answers to as we aim at keeping the national carrier afloat and in business. We know that airlines worldwide are making marginal gains but such a loss by Kenya Airways is and should be disturbing.

It is true that the slump in tourism has affected many sectors of the economy and Kenya Airways was not immune. It is also true that the Ebola outbreak in West Africa affected Kenya Airways’ business.

We also know that preliminary investigations by the Senate have revealed that Kenya Airways has suffered due to poor management. Operations at the airline appear to be dogged by un-strategic business decisions leading to a model that is consuming more than it is generating.

A time has come that we must bite the bullet and immediately take a decisive step to dealing with what appears to be poor management. Someone must take responsibility for this loss over the last year even if it means sending the entire management packing, it must be done.

The Senate has found that poor investment decisions such as the buying and leasing of planes has left the airline highly indebted. Indeed, the financial results released last week show that Kenya Airways’ loans rose by Sh50 billion in one year. And still, the airline is seeking to borrow more meaning that it will remain unprofitable for a longer while.

The moment when Kenya Airways started taking loans to finance its operations including paying its recurrent expenditure such as salaries, was the point at which its management ought to have gone back to the drawing board.

It also appears that Kenya Airways is not conscious to the growing domestic tourism market that seems to be helping the industry remain afloat in the midst of minimal foreign tourists. Its business model seems to discourage many Kenyans from seeking its travel services within the country due to the high costs, which has made it remain unattractive.

Kenya Airways must look at ways of not only bringing down its ticketing locally and regionally but also increasing its routing within the continent. It is disturbing that Kenyans would rather fly South Africa Airways or Ethiopian Airlines to continental destinations than fly Kenya Airways due to high prices.

If the airline cannot compete internationally, then it is prudent that it works hard to fight for the regional and continental airspace.

Finally, there must be a thorough audit of Kenya Airways operations in the last couple of years. This audit should and must establish whether members of the Kenya Airways management have had any role in the running down of the airline.

The special audit must look at all decisions made over the last couple of years and their possible contribution to the airline’s poor performance. Were these decisions deliberately made to bring down the company? Who is culpable and what should be done to them?

The current financial statements must also be interrogated further to establish this huge jump in the losses. Could someone be mischievously attempting to force an early bailout through public funds?

Kenya Airways is an important entity for this country that has in the past been an envy of the Continent. It carries our national flag and identity globally and must therefore be saved from collapse.

Let us work hard and save the Pride of Africa.

(The writer is a Political and Communications consultant. Twitter @MachelWaikenda)

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  • plasmodium falciparum

    True to form and typical of Kenyans; we want to thoroughly evaluate the problem only when the horse has bolted from the barn. For us, we are incapable of reading or noticing symptoms and warning signs. Never pro active always reactive. Let KQ die its dinosaur death

  • Never Give Up

    Some powerful people have plundered and destroyed this airline.In international ticketing agents will give you the cheapest ticket avaialable whether you are connecting the flight or travelling directly.To Africa and generally several destinations they prefer Emirates,Fly Dubai or even the more expensive Qatar Airways…its triple to fly by Kenya Airways from Dubai to Accra.Emirates charges almost half the price.The KQ management are a bunch or losers who live out of the touch with reality on the ground.They have already lost almost ALL ROUTES when it comes to competing with other airlines.The government may bail them out with 20 Billion, it wont help at all… they have to GIVE REALISTIC PRICES..passengers want to save every little penny.sack the whole team get people WHO KNOW WHAT THEY ARE DOING in there.who is responsible for pricing in this aircraft?those clowns should be the first to go.

  • sisemikitu

    Do not simplify the issue!

    Just look at sales, margins, turnovers and capex. When was mawingu project conceived, who were the architects and what did it entail?

  • KamiraNdigithu

    When you take the free market out of the equation and insert in it’s place a bureaucracy to run an airline, you end up with the mess the airline is in. The ‘too big to fail’ theory is a farce, it was a farce in Washington DC when nearly a trillion dollars was stolen from the American public in 2008 and handed over to well connected banks and other key players in industry..those companies are no better off than they were before..they will collapse eventually because the problem was not addressed..just duct taped. The solution to KAQ is to sell it to entrepreneurs and get the government out of running it. How many companies can you name that are government run are having a positive cash flow in Kenya? or anywhere else for that matter? Private enterprise is the only place where the customer is served to the best or else they walk. Government run monopolies are managed by bureaucrats that don’t get paid for doing a better job each year, they just draw a paycheck whether the company wins or looses. Sell the assets to someone that will go in and streamline the place in pursuit of a profit and get the government of the business…The US has no national carrier, they are all public or private companies..Kenya should take a few lessons from that.

  • lamrof

    Wow, too big to fail. Africans are learning quick, this american farce. Maybe its better not to watch CNN too much.

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