Michael Joseph: Kenya Airways nationalization is not the answer anymore

Kenya Airways (KQ) Board Chairman Michael Joseph says the proposed nationalization of the carrier is not the only way out for the struggling airline which is presently flying through turbulence.

In spite of its heavy reliance on exchequer support in the last three years, Joseph says returning the carrier under the wings of government is not the only cure on the table even as government support remains integral.

“Things have dramatically changed since then even from a nationalization point of view. It’s not the answer anymore we need to do something different. We have a proposition but it needs support from the government which may not necessarily be financial,” he said during an interview with Citizen TV’s JKL Live on Wednesday night.

“We need to look at partnerships that will help us grow and become a much bigger competitor against leading nationalized carriers such as Middle Eastern operators.”

While Joseph did not divulge further on the details of the new direction, he said the plan is centered on significantly trimming operational costs to compete at par with peers such as Ethiopian Airlines.

KQ’s operational costs proved definitive in dragging the carrier to its biggest ever full-year Ksh.36.2 billion loss earlier this week as revenues tumbled in the wake of disruptions in the aviation sector and subsequent low passenger demand.

Revenues in the period for instance fell by 58.8 per cent to Ksh52.8 billion. This is as operating costs which largely comprise of fixed costs only eased by 38.5 per cent to still stand above earnings in the year.

According to the KQ Board Chairman, the carrier is already at an advanced staged to clear up its legacy costs issues to include a review of its leasing contracts.

“Allan (Kilavuka- KQ CEO) and his team have negotiated about 70 per cent of our leases for a change to terms. We for instance have something called power by the hour in which we pay when we use the plane moving away from a monthly fixed-cost,” he added.

Presently, the carrier remains dependent on exchequer funding and expects support of up to Ksh.28 billion from the fiscal agent under the first supplementary budget which was passed this week by Parliament.

On Tuesday, KQ CEO Allan Kilavuka confirmed the receipt of Ksh.6 billion as part of the exchequer funding at the close of December 2020.

The airline predicts a gradual and painful recovery from the pandemic with pre-pandemic demand levels expected to resume in 2024 at the earliest.

As such, Michael Joseph insists on the need for government support as revenues remain volatile over the short-run.

“We’re still hanging in there, I know this might not be the right description. Our recovery will be dependent on how long this crisis lasts. The question is, can we survive till then? We will need support,” he said.

The remarks by Michael Joseph come as the National Aviation Management Bill which is centered on nationalizing KQ staggers through Parliament.

On Thursday last week, Majority leader in the National Assembly Amos Kimunya stood down against moving the bill for second reading in fear that it may have been shot down by MPs in a ongoing spate over the appropriation of NG-CDF funds.

Around the world, different airlines have taken different directions in staying in business as they also suffer from the pandemic’s strife.

Closer home, Rwanda’s national carrier (RwandAir) is set to sell a 49 per cent stake to Gulf carrier Qatar Airways which is also taking a 60 per cent stake in a new airport in the country.

Qatar is on a consolidation spree at plans to take a further stake in Latin America airlines represented in the LATAM Airlines Group strengthening its portfolio of stakes which further include British Airways and Cathy Pacific.