Kenya Airways has been a strategic tool that has helped Kenya and will continue for years to come. Leaders from across the divide have been questioning why the national carrier Kenya Airways constantly gets government bailouts.
Aviation is quite a sophisticated field, and it can sometimes overwhelm the lay reader as it is an industrial arm that needs more thought if it is to be discussed exhaustively.
A few weeks ago, media reports indicated that the government allocated Sh26.6 billion as the capital injection into the national carrier. As has now become the norm, politicians and social media warriors criticized the move. It is important, therefore, that this matter be put into context.
Emirates of UAE, Lufthansa of Germany, Cathay Pacific of Hong Kong, Air France-KLM of France and Netherlands, Iberia of Spain among many other airlines have received aid from their governments, yet these airlines were in a better competitive state than KQ. KEEP READING
During the Covid-19 pandemic, airlines collectively lost Sh300 trillion globally, an equivalent that is 10 times the national budget of Kenya. KQ does not operate in isolation and is among these casualties.
According to an International Think Tank on Airlines, just to get to the pre-Jan 2020 levels, governments across the world would need to inject an equivalent of Sh200 trillion into aviation, and the rest will be for the industry to seek ways of raising. This is not going to be easy for KQ, noting that there has been a 31 per cent reduction in passenger seats if we assume that this is the only way revenue is generated.
KQ was given an extension of trading suspension at the Nairobi Securities Exchange (NSE). If this route was opened, the airline would have the advantage of raising needed capital by offering shares held to improve cash flow and generate more reserves.
Drop in revenue
Consequently, the group made a loss of Sh36,219 million with passenger revenue having dropped by 17 per cent to Sh20 million. What press reports have not included is that customer behavior for air travel will be suppressed until 2024, according to conservative projections.
Moreover, the bailout money the government plans to invest in the airline will help strengthen cash flow and speed up reforms. The government has stated that the support is conditional on KQ carrying out reforms. KQ had already embarked on a staff rationalisation process and will have to show that other cost […]
