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A country’s airline is more than a carrier of people, goods

By The Standard | Published Wed, November 15th 2017 at 00:00, Updated November 14th 2017 at 23:42 GMT +3
A Kenya Airways plane at the Jomo Kenyatta International Airport in Nairobi. (Photo: Courtesy)

A country’s airline is more than a carrier of people and goods. It is a symbol of patriotism and pride. Together with the airport, they encapsulate what is good and what is awful about a country. Thus British Airways and Heathrow say a lot about the United Kingdom just like Air France and Charles de Gaulle airport says about France and so does the KLM (Royal Dutch Airlines) and Amsterdam about The Netherlands.

The decline and fall of the Soviet Union could be attributed to the decrepit state of its airports. The absence of a national carrier or an airport thus became a way of gauging how low an African country had sunk. There are accounts of heads of state flying a plane-full of coterie on junkets across the world. National carriers were rerouted to take the Big Men’s spouses and girlfriends for tax-funded shopping sprees in European capitals.

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Mercifully, Kenya Airways was spared these shenanigans. Yet danger kept lurking in the dark. It was nearly run aground in the early 1990s and the entry of Royal Airlines- KLM kept it afloat albeit for some time.

KQ became the first African airline to be privatised in 1996. There has been a lot of hand-wringing about that engagement especially after KQ seemed to sink into familiar territory of massive debt and mindboggling losses; posting a Sh29 billion loss in 2015.

What followed was a familiar path; a purge of the C-suite that ended with the exit of CEO Mbuvi Ngunze in April; assets were liquidated and staff were laid off.  

Michael Joseph, a corporate titan of no mean repute, was wheeled in as chairman if only to reassure jittery investors. Sebastian Mikosz, a polish national, was tapped as CEO.

To observers, all that was akin to rearranging the Titanic after it hit the iceberg in the Atlantic. More needed to be done especially about KQ’s crippling debt. The airline needed to be freed from the stranglehold of some Sh50 billion it owed to banks.

A painstaking restructuring plan was drawn up.

And so recent developments that have seen Treasury and 10 local banks swap debt for equity and KLM’s shareholding diluted offer great relief. Collectively, Treasury will own 48.9 per cent, local banks 38.1 per cent and KLM 7.8 per cent in what is called Financial and Capital Optimisation Plan.

There are lessons to learn from the seemingly bad deal entered between KLM and KQ. One is that a bad deal is a bad deal; walk away when you can.

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KLM was brought in to prevent the airline from imminent collapse in a decision that was hailed at the time. But then, KQ made huge concessions that returned to haunt it later. Every major decision would only pass with the approval of the Dutch strategic partners, who were also running their competing business in the same space.

Second, in spite of the best of intentions, a good management structure is of paramount importance in a turnaround strategy.

Some would argue that huge capital investment has gone into the business with very little Return on Investment. Questions have been raised about how prudent it was to go on a plane acquisition spree. As of August this year, its fleet numbered 34.  There have been cases of omission and commission that point squarely to a week management structure.  

After what arguably is a failed experiment, Kenyans have a new opportunity to play a leading role in rewriting the erstwhile gloomy story of the national airline.

A national airline has major benefits for many sectors of the economy.

The Jomo Kenyatta International Airport is a main transit point for the region, handling an estimated 2.5 million passengers yearly. An own airline creates great synergy in the local transport sector. Moreover, it would have been a great shame that direct flights to the US – one of the most lucrative routes- would start without our own airline in the skies.

So by embarking on the new journey of re-awakening the Pride of Africa, the new KQ management owes it to Kenyans to ensure KQ stays in the skies for the long haul.

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