On Kenya Airways, the solution is outside the profit model

By Gitahi Ngunyi

Nationalizing Kenya Airways in the midst of mounting debt? Sounds like a terrible idea.

The feeling may be understandable given the fact that the airline was profitable a few years before it was privatized.

Some have argued that it is doesn’t sound good because nationalization plans come at a time when the company is deep in financial trouble and therefore the current plans to nationalize the national carrier maybe a back door way of providing a less painful exit for foreign and local investors who reaped billions of shillings in shareholder dividends from Kenya Airways in its profit making days.

But Kenyans have to look beyond the profit motive to understand why saving Kenya Airways is necessary. In fact, it can be demonstrated arithmetically that the chase for profits is one of the reasons that the airline has found itself in its current financial state.

The six straight years of loss making may have clouded many people’s views on the critical role that Kenya Airways has in the national economy.

For starters, collapse of Kenya Airways would lead to a near collapse of the tourism industry.

Those who argue that that KQ can be let to do die do not understand the place of the airline in the country’s economy.

And KQ is tied to the Kenyan thriving tourism industry to the hip.

In other words, the impact of Kenya Airways collapse would not just be felt by the 3,500 employees of the airline and its suppliers. It was also be felt by the more than 4.5 million people who depend on tourism for livelihoods.

Tourism has pushed itself to a position where a small change in the sector will be felt by the entire economy. For example, Economic Survey 2019 shows that growth from subsectors in the industry contributed heavily to the GDP growth in 2018.

Here is the KQ story as told by crucial numbers.

Kenya Airports Authority (KAA) reports available to the public show that the country’s aviation industry growth is largely by Kenya Airways which accounts to between 50-60 passengers traffic.

Essentially what this means is that one out of two people that flew in or out of Kenya in 2018 did so through Kenya Airways.

KAA report shows that 10 million passengers went through Kenyan airports, which means 5 million were transported by KQ.

At the same time, data published in Economy Survey 2019 Report shows that tourist arrivals hit the 2 million in 2018.  

Again, this means that one in every two tourists was flown to Kenya by KQ. In other words, KQ may have helped generate Sh78 billion out of Sh157 billion earned by the tourism sector last year.

At the heart of this relationship between airline and tourism is an often forgotten fact that state owned airlines and railways are primary means of providing affordable and accessible international air transport for citizens of a country and its visitors and in the process spurring other areas of growth in the economy.

It is never about profits. For example, China, the second biggest economy in the world has three state owned airlines which have not posted profits in decades. But these airlines have not been left to die because they don’t post profits.

Closer home, South Africa Airways posts bigger losses than Kenya Airways every year. The South African government however keeps on bailing out the airline because of the airline’s crucial role in the country’s tourism industry.

If it were to be evaluated on other parameters, KQ which is relatively young, at 42, has performed exemplary well. The airline is the most reliable in Africa for Kenyans travelling to African destinations whether for leisure or trade.

Even if KQ did not play such a huge role as it does in tourism, it would be most irresponsible to let such a big employer collapse.

Let just KQ employee’s numbers in perspective. At 3,700 employees, the airline employs almost the same number as East Africa’s most profitable company, Safaricom, and half the number of people employed at Equity Group.

In other words, the fact that the airline employees such a huge number of workers is a reason enough for the government to keep the company alive.

Looked at soberly, the other available options for saving the airline would push up public anger. Such options would include selling the airline to one of the successful international airlines such as Ethiopian Airlines, Qatar Airways or Emirates.

Taking this option would have disastrous consequences on the Kenyan economy. This would mean direction of international tourist traffic from Kenya to traffic hubs of the airlines that would acquire KQ.  The direct consequence would lead to significant job losses across the country. No sector would be left untouched by a decision to take this option.

Indeed, a report of the parliamentary committee on Transport, Public Works and Housing currently under discussion shows the proposed merger of KQ with Jomo Kenyatta International Airport has generated aviation and public consensus on the condition that the airline is first fully nationalised.

The author is a business journalist and blogger and can be reached on gitahi.njeri@yahoo.com

You might also like