BAILOUT OR COMPENSATION – EITHER WAY DOES KENYA AIRWAYS EXPECT 4.2 BILLION SHILLINGS
(Posted 31st May 2015)
When at the height of the Ebola hysteria in Eastern Africa the Kenyan government bowed to pressure from social media and a clearly highly incited yet poorly informed public and suspended Kenya Airways’ services to much of West Africa, airline sources were swift to point at the colossal loss of revenue KQ was faced with. At the time, and even now, was it even the loss in market share in those parts of West Africa Kenya Airways had to face up to, as other carriers took advantage when they kept serving this important source market for transit traffic.
Eventually a figure was put into the public domain, suggesting that the revenue losses would amount to between four and five billion Kenya Shillings, which then of course hit the airline’s bottom line aggravating an already challenging situation arising from harsh anti travel advisories slapped on Kenya by Britain and some of her close allies. Whether this was a tit for tat reaction over a range of unresolved issues in bilateral relations or not, the use of that particular language suggests that this was at least a likely reason, or whether it wasn’t is for historians to figure out. They will no doubt look in 50 years at White Halls and Number 10’s presently classified documents when those will be released into the public domain, but for now the net effect is that Kenya’s tourism industry was dealt a heavy blow.
As a result even hitherto reputable tourism organizations like Skal International bowed to the hysteria and pulled their 2015 congress from Kenya’s beaches, blame again laid squarely at the British door as much as the cowardice of those who by the very nature of their organization should have stood by Kenya in her hour of need..
Kenya Airways, a publicly quoted company on the Nairobi Stock Exchange, had to equally share the impact of those deviously worded advisories, and all eyes will be on the upcoming announcement for the annual general meeting, just how deep in the red the national airline will be.
At least for the West Africa losses there now seems relief on the way though. It was learned while in Kenya last week that a budget line in form of a ‘loan’ has been created worth 4.2 billion Kenya Shillings, which, intriguingly, seems to match the losses the airline suffered when the Ministry of Health last year banned flights to certain parts of West Africa.
If it is a loan or a bailout will be a secondary question though for the airline’s finance managers as the money, once it flows into the airline’s coffers, will allow them to reduce bank overdrafts and regain some financial stability once again.
Other measures put into place by Kenya Airways to show better debt ratio’s has been the changeover in policy from buying to leasing aircraft, without having to compromise on the planned growth of destinations. Additional sale and leaseback of parts of the relatively young fleet is another option the company can use to accomplish a better bottom line result. It is understood from usually reliable sources that the airline is still intent to go ahead with the construction of its own hotel at the airport and a number of internationally branded hotel management companies have put in bids to be considered, first on the shortlist and then to become the chosen partner. Other land owned by the airline however is apparently being hived off, again to generate funds to boost the company’s financial situation in the current financial year, when a major turnaround, after some years of consecutive losses, is expected.
There are positive news though too for the airline and the regular passengers as the new Terminal 1A has made the handling of travelers on the ground much easier and improved facilities like the new premium lounges Pride and Simba brought in plenty of positive comments from frequent flyers. Service on board too shows sustained quality, perceived AND experienced as superior to the nearest competitors the airline has in the region.
Time will tell how all these measures and the government money will work out for Kenya Airways but the top management, now under Group CEO Mbuvi Ngunze, has shown intent and purpose to turn things around on the double. For breaking and regular aviation news from the region look no further but this space.