KQ sees partnerships, consolidation as nationalization options

National carrier Kenya Airways (KQ) sees mergers & acquisitions and partnerships as options to the planned nationalization of the airline.

This is as management strives to find recovery paths for the carrier even as it awaits the outcome of the proposed nationalization process.

“We have no control over the process or even what the end result might be. Our job is to ensure the survival and growth of Kenya Airways, hence we continue to look at other opportunities,” said KQ Chairman Michael Joseph.

“Even pre-COVID-19 challenges were quite big as far as we are concerned. It’s only become more challenging now that we have the pandemic.”

According to Michael Joseph, consolidation is already shaping aviation in other regions setting it down as an option for the national carrier.

“Consolidation in the airline market is what’s happening. If you look at the US market, there has been enormous consolidation over the last 10 years and we now see four or five big airlines. We are seeing the same in Europe. We continue to exploit this opportunities as they come our way,” he added.

Partnerships available to the carrier include the extension of code-share agreements, interline deals, short-term leases and non-airline alliances.

KQ continues to see a tougher 2021 driven by uncertainties surrounding the COVID-19 pandemic and predicts a significant upturn in operations after 2024.

“2021 is still a very challenging year for us. Every time we think we are picking or ramping up, we are hit with a new restrictions in one of our destinations severely affecting our operations,” noted KQ Chief Executive Officer Allan Kilavuka.

“We are for sure doing much better than 2020 but are a far cry from 2019 levels.”

Currently the carrier is operating with an average load factor of 65 per cent down from 75 per cent in 2019.

KQ has recently engaged British consultancy Steer Group to guide its turnaround policy options in line with recommendations by the National Treasury and the International Monetary Fund (IMF).

A report from the consultancy is expected to pin the carrier’s next strategy direction including the possibility of further exchequer funding.

Last year, KQ initiated its own remedies to stay flying including a right sizing exercise to mute costs growth.

So far, the airline says it has cut about 24 per cent of its staff base translating to a 30 per cent reduction in overhead costs after additional initiatives including salary cuts.