AIRLINE SHARE PRICE CONTINUES TO LOSE VALUE AS #COVID19 BITES
(Posted 23rd April 2020)
When the Corona Virus crisis first struck and airlines around the world felt the impact of the disease, were many of them in outright denial of the aggressive nature and rapid global spread as they dabbled in date change after date change for flight cancellations, changing refund rules and more. From mid March it became end March, mid April, end April and reality now looks more like mid year or even beyond for passenger flights to resume.
Airlines in Africa, already struggling – apart from industry leader Ethiopian Airlines which is however also losing money at present – have come under added pressure after flight bans came into effect. The two most endangered ones, South African Airways and Kenya Airways, are staring into the abyss now. In South Africa has government stated that they can no longer spare funds to bail out the airline once again and the administrators have now applied to lay off the entire workforce.
In Kenya, with the nationalisation plan not really clear, is government also looking at a sharp drop in revenues and income while the fight against COVID19 consumes much of the available funds in the kitty, leaving little wriggling room to meet Kenya Airways’ demand for an emergency cash injection.
While the airline is shifting focus now on cargo operations, has again Ethiopian Airlines won global supply deals, as a result of superior airport infrastructure when it comes to freight handling and the larger number of dedicated cargo aircraft available.
It comes as no surprise therefore that the value of a Kenya Airways share has dropped yesterday to just 97 cents Kenya currency, the lowest ever recorded.
There is widespread speculation among aviation pundits, that should SAA be reaching the end of the road Kenya Airways might then follow into the aviation graveyard, which COVID19 has filled with additional casualties – after already over the past two years airline closures and bankruptcies made headlines around the world.
Like in South Africa, where the national airline faces the market exit, is Kenya Airways too seen as a key element for any tourism revival in the region. Without Kenya Airways will it be much harder to kickstart tourism, itself already a very challenging prospect. To make matters worse, countries in the region with recently revived national airlines like Air Tanzania, which operate at significant losses anyway as their governments seem to have no regard to financial prudence and viable operations, have chipped away at KQ’s market share on routes which were the backbone of their revenues.
The next few days and weeks will be crucial for Kenya Airways just like for South African Airways and ATCNews will provide updates on their status as and when available.
