How Kenya Airways plans to overcome financial turbulence

Kenya Airways takes off from Jomo Kenyatta International Airport in Nairobi. [File, Standard] Following recently unveiled half-year financial results for Kenya Airways (KQ), a familiar and perennial debate has re-emerged: Does Kenya truly require a national carrier? Some critics have gone so far as to call for its dissolution-despite the historic milestone it achieved just last year, posting its first net profit in a decade. They question how such a promising financial trajectory-marked by a net profit of Sh5.4 billion-could so swiftly reverse into a net loss. They ask, can this progress be trusted? Is it sustainable? But one must ask in turn-is such scepticism warranted? To render a fair judgment, one must examine the broader global context in which these events are unfolding. The aviation industry worldwide is still contending with the aftershocks of Covid-19. Severe supply chain disruptions continue to constrain the availability of critical aircraft parts and delay the delivery of new aircraft. Geopolitical tremors-particularly the ongoing Russia-Ukraine conflict and unrest in the Middle East-have further exacerbated global instability. No airline has emerged unscathed. Scheduled aircraft maintenance now extends far beyond projected timelines, while industry giants like Boeing and Airbus together wrestle with an unprecedented backlog exceeding 17,000 aircraft orders. Today, ordering a new aircraft implies a delivery horizon of seven to eleven years. Kenya Airways, too, finds itself at the mercy of these global headwinds. At present, three of its Boeing 787 Dreamliners remain grounded-awaiting engine overhauls at a limited number of approved global facilities. This has curtailed the airline's overall capacity by 20 per cent. And yet, while flight hours have diminished, fixed operational costs remain constant. To illustrate the gravity of this operational disruption: Each Dreamliner in the Kenya Airways fleet accommodates 234 passengers. A round-trip journey from Nairobi to London commands, on average, Sh100,000 per seat. A fully booked return flight, therefore, yields Sh23.4 million in passenger revenue-exclusive of ancillary income from cargo. With three such aircraft grounded daily, the airline forfeits Sh70.2 million in daily revenue-an estimated Sh2.1 billion each month. Over a six-month period, this revenue loss aggregates to a staggering Sh12.6 billion. This simplified illustration does not fully capture the complexity of airline economics. Operational expenditures-including personnel costs, aircraft maintenance, depreciation, airport and airspace usage fees, catering, and ground services-consume significant resources. According to the International Air Transport Association, African carriers operate on razor-thin margins, averaging a mere 1 per cent profit. In 2024, African airlines reportedly made a paltry 65 US cents of net profit per passenger. And yet, amid these constraints, success is not unattainable. Across Africa-and globally-exemplary national carriers have flourished. A unifying trait among them is strategic consolidation: Nations that have consolidated critical aviation assets under a single flagship carrier have reaped economies of scale and operational resilience. These assets include hub airports, ground handling services, catering units, airport hotels, air navigation infrastructure, and aviation training centres. Revenues from these adjacent services provide vital ballast during periods of low passenger demand, sustaining overall enterprise viability. While full consolidation of such aviation assets is, for now, beyond Kenya Airways' immediate grasp, the airline is actively pursuing innovative and strategic alternatives. Chief among these is the diversification of revenue streams. To this end, Kenya Airways has substantially expanded its Maintenance, Repair, and Overhaul (MRO) capabilities, positioning itself as a regional technical and engineering hub. Notably, the Kenya Airways MRO facility holds certification from the European Union Aviation Safety Agency, placing it among a select few such establishments on the African continent. This strategic investment now enables KQ to provide services to regional and international carriers including Fanjet, Astral Aviation, Jambojet, Uganda Airlines, Precision Air, Air Peace, Mauritania Airlines, Air Tanzania, Air Botswana, Air Burkina, and RwandAir, among others. Another pillar of KQ's resilience strategy is the deliberate expansion of its cargo business-a sector often overlooked, yet one of significantly higher margins. Industry evidence suggests that cargo operations can be up to 40 per cent more profitable than passenger services. KQ' aims to double its cargo-derived revenue from 10 per cent to 20 per cent, capitalising on the surging demand for airfreight. Consequently, the airline has acquired two Boeing 737-800SF aircraft to bolster its aging freighter fleet, with further additions planned. Beyond immediate profit-driven initiatives, KQ is also investing in future-forward technologies through its innovation arm, Fahari Aviation. This forward-looking subsidiary is pioneering the use of drones and electric vertical take-off and landing aircraft, with applications in sectors ranging from agriculture to wildlife conservation and urban mobility. For those who question the necessity of a national carrier, it is critical to consider the broader implications of its absence. Kenya Airways contributes approximately USD 2.6 billion to national GDP and stands as a formidable source of tax revenue-monies that would be lost instantaneously should the airline fold. The airline sustains over 5,000 direct jobs, 20,000 indirect roles, and supports a further 300,000 livelihoods in interconnected industries such as tourism. KQ is an indispensable pillar of Kenya's agribusiness and manufacturing export ecosystem. In 2024 alone, the country exported over Sh16 billion worth of goods-including apparel, horticultural products, chilled meat, and seafood-much of which was transported by Kenya Airways. Moreover, the airline underpins the strategic importance of Jomo Kenyatta International Airport as a regional aviation hub, facilitating over 60 per cent of all international and domestic passenger traffic through Nairobi. The global standing of Nairobi as a United Nations city is owed, in no small part, to robust air connectivity sustained by a national carrier of Kenya Airways' stature. Is Kenya Airways "too big to fail"? Certainly not. No enterprise enjoys such immunity. The pertinent question, rather, is this: Can the nation afford the demise of one of its most potent economic and diplomatic enablers-and still hope to maintain its regional preeminence? KQ has faced formidable turbulence. Yet its compass remains true, and with sustained strategic reforms, it shall continue to ascend-resolutely carrying the Kenyan flag across skies near and far, as the enduring Pride of Africa.

How Kenya Airways plans to overcome financial turbulence

Related Topics

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

DIGGER JOBS

Digger Motors

Digger Real Estate

How Kenya Airways plans to overcome financial turbulence

Related Topics

Trending Now

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS