Cut KQ some slack, worse could happen

We really ought to let up on our grievances against Kenya Airways. Last week, Qatar Airways announced a loss of $639 million. This was significantly higher than its loss of $69 million last year. Comparatively, KQ posted losses of $75 million for 2018, compared with $64 million in 2017.

Before casting aspersions on KQ, we seem to overlook the fact that the carrier has progressively been reducing its loss from a high of Sh26 billion in 2015.

NATIONALISING

Back to Qatar Airways, it’s a state-owned airline, a status Kenya's Parliament has approved for Kenya Airways, scheduled to take effect this year. But does a state-owned airline equal profitability?

The government has bailed out Kenya Airways to the tune of Sh26.7 billion this financial year. Even when bailed out, nationalising an airline does not prevent it from facing the challenges it had while it was privatised.

Last week, oil prices went up to $100 after the drone attack on Aramco in Saudi Arabia, resulting in a fall in airline share prices. If KQ were required to hedge against fuel now — which would not be advisable — it would be expected to pay more for fuel, which would impact its profit. Even when KQ is state-owned and it opens new routes to Singapore, for example, as proposed by President Uhuru Kenyatta last week, it will still have to contend with competitors on those routes and more.

FUEL PRICES

A country like China is not concerned about having its state airlines become profitable; its aim is to have as many international routes as possible, which come at low prices. How, then, is KQ going to compete with that while seeking to make a profit?

If we look at foreign currency exchanges, where a stronger dollar will adversely affect ticket sales abroad, currencies will keep fluctuating and there is little the government can do about it other than grow the economy and make it stronger for the shilling to be competitive.

And so, when you think about it, KQ may not be necessarily better off once it is nationalised. Among the options that would make the airline profitable is if fuel prices reduced. The other option is the domestic market. Low-cost airlines have filled the gap left by Kenya Airways after raising fares.

CASH FLOW

Of course, it cannot be overstated that nationalising an airline only to have it mismanaged and operate as a private carrier for a few will be an even greater tragedy than the losses posted.

But, even as I defend KQ, I have a niggling thought. Why sell a free landing spot at an airport? If you're riddled with debt and major cash flow issues, you don't sell for a short-term gain only to end up paying for what was free.

We hope for better commercial decisions from our soon-to-be state-owned carrier.

The writer focuses on children’s issues; [email protected]