Let’s drop the conspiracy talk and avert looming KQ collapse

Sorry folks, my take on the raging Kenya Airways “versus” Kenya Airports Authority saga will not please conspiracy buffs.

I see it less as a grab by big shot political players for KAA’s assets using their banks and more as a survival tactic by an airline threatened by regional rivals who are heavily bankrolled by their governments.

We are talking of Ethiopian Airlines, Emirates, Etihad, Qatar, and lately, the upstart RwandAir.

Let’s face it. If KQ were to sink owing to its crippling debts and the onslaught by better subsidised rivals, nobody will win.

Not even KAA, which gets around 60 percent of its revenues – directly and indirectly – from KQ. It, too, will stare insolvency in the face.

TURNAROUND

It’s in the best interests of both entities to find a way out of the hole KQ is in. It is not about who is the cash cow between KAA and KQ. It is about the overall health of Kenya’s aviation industry.

First, there is nothing like a takeover of anybody’s assets on the cards. It’s not even a merger.

What I understand is being contemplated is a 30-year concession to a third party who will help align the operations of KAA and KQ such as to enhance synergies.

As I said, a poorly performing KQ directly affects KAA’s bottom line. The key to a turnaround is the Jomo Kenyatta International Airport, KQ’s vital hub.

Optimise its commercial operations, and everybody will be better off. As it is, Kenya has an airline vis-a-vis airport model that is not well integrated or synchronised for common goals.

EFFICIENCY

Let’s debunk some myths. The first one is that KAA must remain untouchable because it makes a profit. Making money is not always synonymous with being well-run.

Monopolies like Kenya Power Company make pots of money. Yet nobody says they are efficiently managed (remember the frequent power blackouts?).

An installation like JKIA whose business is the conveyance of international travellers must put a premium on efficiency and first-rate customer services. JKIA can do better than it is presently.

Ground handling services at the airport require an upgrade. The terminals, restaurants, bars, restrooms et cetera all need major sprucing up.

The aircraft repair and maintenance operations must improve to win more business from other airlines apart from KQ.

REVENUE STREAMS

Above all, a focused operator is needed to generate the cash for a long planned-for new terminal and second runway.

Is the income from aircraft landing and parking fees, air bridges, fuel uplift and the other aeronautical revenue streams being maximised or put to optimal use?

How about the non-aeronautical fees from duty-free shops, catering services and tourist shops? Does KAA have the capacity and vision to take JKIA to the next level, not just as a regional hub, but a world-class one? Not quite.

What is required for JKIA is an operator who will generate the revenues to actualise this vision. Transform JKIA, and you lift KQ. And KAA too.

The proposal on the table is for a special purpose vehicle (SPV), which is a private limited company that will concentrate solely on running JKIA while leaving KAA’s and KQ’s core assets ring-fenced. This is hardly a new concept in today’s aviation world.

MANAGEMENT

Private companies managing airports on behalf of governments are becoming the norm globally. I’ll give just two examples.

The Singapore airport, which aviation experts rate as the best in the world, is managed by a private company called Changi Airport Group.

This company has been contracted to run other airports in countries as diverse as Russia and Brazil.

A similar situation prevails in Turkey, whose airports are managed by a private airport services firm called TAV. It’s not even Turkish.

It is owned by Paris Aeroport, a privately incorporated firm that runs Paris’s premier Charles de Gaulle airport.

Indeed, foreign companies are not just being contracted to run airports, they are taking direct ownership positions in them. Mumbai airport is operated as a joint venture that includes private foreign investors.

PARLIAMENT

Whether it’s an SPV or another private company to run JKIA, transparency is mandatory to allay public suspicions.

That’s where Parliament should come in, by ensuring any such arrangement is above board and the ownership transparent.

Unfortunately, MPs have become as easily swayed as bloggers by rumour and conspiracy theories.

If I sign a 30-year lease on your building, does it mean I now own it? The MPs’ evident unfamiliarity with modern aviation practices will be a millstone on KQ’s neck even as it faces deadly and unequal competition from state-owned carriers intent on running it out of business.

Who will look out for the interests of our national carrier?

Let’s dispense with another myth – about “secret” offshore-registered KQ “owners”. The government has 48 percent of the airline’s shareholding.

The next biggest chunk is held by a consortium of local creditor banks, with Equity (not CBA) having the highest exposure. KLM has just below eight percent.

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