Fred Aminga @faminga
Kenya Airways Chairman Michael Joseph has warned that the national carrier is not likely to make any profit soon and must be nationalised if it is to survive and justify its existence.
He said the carrier, currently in deep financial distress, must move on with a different formation and flight path, otherwise, it will not match the arsenal being prepared by competition.
“KQ is not a profit making organisation, and probably will never be,” he said while speaking to K24. The national carrier, known by its international code KQ, continues to grapple with losses as cost-cutting measures put in place to boost its bottom line are yet to bear fruit.
Level playing field
Joseph said if the Nairobi Securities Exchange-listed airline wants to compete on a level playing field with other carriers which are subsidised by their governments, it must be nationalised.
“All our competitors are 100 per cent government-owned and almost 100 per cent, in some way, subsidised or cross-subsidised by airports and airport services,” he added. Joseph estimated that it will take up to five years to turn around the fortunes of the national carrier if Parliament gives a nod on proposals to nationalise it.
“Nationalisation is something that we don’t want. It is not something that we would aspire to but if this is necessary for the survival of the airline, I would say it is the right way to go,” he said.
Joseph said there is need to change mindsets and acknowledge that the impact it can have is on the gross domestic product (GDP).“We need to have a strategic view on what Ethiopian Airline is doing for Addis, Emirates is doing for Dubai and Turkish Airline is doing for Turkey,” he added.
Kenya Airways operates in a competitive environment dominated by increasing penetration of markets by airlines, usurping what stakeholders say should be Kenya’s share.
The other competing carriers and airports have also invested heavily with Doha and Dubai raising the bar in terms of services and infrastructure. Proponents of nationalising the carrier say that if nothing happens soon, Jomo Kenyatta International Airport (JKIA) might soon become a hub for East Africa region only.
Ethiopia is currently constructing a new airport facility, meaning it will give Kenya even more competition going forward. Kenya Airways will entail delisting of the national carrier from the NSE and negotiations and buy-outs of shareholders after the valuation of its shares.
In a report released last month, Parliament has recommended the formation of an umbrella Aviation Holding Company to run Kenya’s aviation sector.
The National Assembly’s Transport Committee has recommended that the government establishes the holding company with four subsidiaries comprising the Kenya Airports Authority, Kenya Airways, JKIA and a centralised Aviation Services College, which will run independently.
It will all take place by leveraging a Special Purpose Vehicle (PSV) with the entity banking on government goodwill in terms of zero rating various supplies, tax exemptions and preferred terms.
In the meantime, Joseph must oversee the process of recruiting a new chief executive officer after the current boss, Sebastian Mikosz announced he will be retiring before his term expires in June next year.
The Polish citizen was hired in 2017 to turn around the struggling airline that last year reported an after-tax loss of Sh7.5 billion, compared with Sh6.4 billion suffered in the previous year.
“It is not someone you can get off the shelf,” Joseph said, adding that given KQ’s current condition, to turn around the carrier will need a person with deep airline experience.