It’s time to cut our losses in perennial loss-making KQ
Financial riskExpatriates have been recruited to oversee the affairs of the company, yet the airline keeps reporting massive losses.
SEE ALSO :Man sues KQ for missing flightThe national carrier will not be the first airline to go under; many have gone down that route. For firms in difficulties, survival is one option. The other options are to sell the airline as the UK regional airline Flybe did or allow the airline to collapse altogether as happened with Flybmi. Another example is the collapse of Monarch Airlines in October 2017 which was referred to as the biggest airline failure in the history of the British aviation industry. At the time of its collapse, the airline was 50 years old and at one point the fifth largest line in the UK. The reasons for its decline that mirror the KQ situation included years of financial difficulties and low ticket pricing policy.
Open sky policyThe reasons why airlines fail are the same worldwide - fuel costs, bad management, falling passenger numbers due to competition from rivals and recently insecurity due to rising cases of terror attacks. In KQ’s case, an increase in fuel prices and falling passenger numbers are largely to blame for the drastic decline in profitability. However, fuel prices can be hedged through future contracts. To sum it up, KQ’s survival strategists should not only focus on ownership and ownership structure as Parliament has suggested. Ownership of the firm can be central to how it performs but to a very low extent. The Parliamentary report is more about ownership structure and not organisational structure and therefore limited to solving KQ’s problems. The airline’s management should tell Kenyans the full story about future profitability and growth before asking for more money from shareholders and debt holders. While at it, they should remember that there is an open sky policy out there, with competition rising by the day. The banks that lent KQ money made a bad credit decision and should not punish taxpayers for it. To make up for their poor decision-making, they now appear hell-bent on recouping their money at whatever cost, something that Parliament must resist. Enhanced management and skills to run an airline might be central to solving KQ’s problems; otherwise, if it is not working, leave it. The writer teaches at the University of Nairobi