N’DJAMENA FLIGHTS SUSPENDED AS KENYA AIRWAYS STRUGGLES WITH COST BURDEN
Kenya Airways has reportedly suspended the twice a week flights to Chad’s capital N’djamena with immediate effect, blaming the halt of low demand and poor forward bookings. Operated until now via Cotonou / Benin, this is Kenya Airways’ third route this year to be suspended, after Rome and Muscat, as a result of austerity measures.
Regular aviation pundits are however speculating over the timing of the announcement and the haste with which the decision appears to have been taken, coinciding with a ruling by Kenya’s Industrial Court ordering the reinstatement of nearly 500 workers retrenched earlier this year. Speculated one regular contributor from Nairobi in an overnight communication: ‘KQ has some serious challenges. The half year result was painted in deep red for which reasons they tried to reduce their cost structure. Retrenchment, especially considering the generous golden handshakes the airline gave those willing to take early retirement and so forth, is costly but saves money for a long time afterwards. Maybe Kenya Airways could have sustained the route to N’djamena. True, it might have been marginal in terms of financial returns but now they face having nearly 500 more staff back on their books. Something had to give and I personally think that there is a link between cutting the route and the immense pressure they are now under considering their bottom line. They only got till March when their financial year ends and every shilling now counts to have an acceptable financial result by then. This is the year, remember, when they launched their share rights issue and when you look at the current share price, this is going to be a problem’.
Others echoed similar sentiments but all were agreed that the ruling of the Industrial Court, which is understood to be appealed by the airline, has sent a stark message to the business community that ahead of the March 2013 elections the business environment just got a lot tougher, as even court rulings seem to play politics these days in Kenya. A cross section of industrialists and leading business figures criticized the ruling sharply, accusing the judge of bias and failing to understand an increasingly harsher business environment while at the same time encouraging militant unions to play into the hands of their political godfathers to tilt the scale in the upcoming general elections.
‘Kenya Airways woes started when they rightly defied a so called directive by the Prime Minister who is of course rooted in the mindset of his late father who was a communist. For that one the command economy is still the norm it seems but bare of legal foundation, the airline did anyway what had to be done. Not long after rumours were fueled that government should get more seats on the board of the airline to ‘control’ it better and make it follow political directives. I know I am not alone putting 2 and 2 together and see this ruling as part of a strategy to give KQ some payback. And the origin of all those troubles rest with that one man and his sycophants around him’ ranted another regular source, seeking reassurance that no name would be given under any circumstances, saying ‘you know how those guys are, they can come for you any time’.
A regular source close to the airline in the meantime reiterated that the rollout of Project Mawingo, Kenya Airways’ 10 year strategic plan, would remain on course as would remain on course regardless of the way the balance sheet looked at the end of the financial year in March 2013 and that aircraft deliveries would not be delayed. ‘N’djamena was a border line case and had to be taken care of. As you say, the election campaign will pose some added problems but once that is over all the underlying factors are largely positive about economic development in Kenya. Strategic plans are not thrown out just because of a few wobbles here and there. They are also subject to periodic review to factor in changes in the business environment and that is common for all sectors of the economy. KQ will be ok’ the source said.
Come what may, Kenya Airways remains the East African region’s aviation giant and recent comments made at the AFRAA Annual General Meeting by the CEO Dr. Titus Naikuni, that the continent’s leading trio of Kenya Airways, Ethiopian Airlines and South African Airways should sit down and talk partnership, is surely a sign that the writing on the wall for African aviation, to either cooperate or be sidelined by the global aviation giants against which individual African airlines will pale and be easy targets. Watch this space.