KENYA: What About Kenya Airways

The news from Kenya Airways is bad. It registered a staggering Ksh26.2 billion ($262 million) loss this past year. M
ore than the staggering loss of the previous year. Despite reports that its passenger numbers were up by 4 million.

That its income from handling was also up. That, relative to the previous year, its revenues were up by Ksh6 billion ($60 million).

It took drastic cost-cutting measures. It sold its parking slot at Heathrow Airport. It sold two of its planes. None of which has made a difference.

The public has a stake in KQ. Partly because we still publicly own about a quarter of it. Partly because individual Kenyans are shareholders in it. Partly because, as its slogan proclaims, it’s meant to be the “Pride of Africa.”

But it isn’t. Anecdotally, that accolade is increasingly given to Ethiopian Airways.

Both airlines, together with South African Airways, have significantly opened Africa up to itself. No more travelling to Europe to come back down in West Africa.

No more matatu-like, nerve-wracking (if entertaining) experiences in cross-continental travel on the infamously named “Air Peut-Etre” – Air Maybe, meaning maybe the plane will arrive, maybe it won’t.

Maybe your suitcase will make it on board, maybe it won’t. Maybe it’ll take off on time, maybe it won’t. Maybe it’ll get you there safely, maybe it won’t.

Travelling west was hair-raising till the mid-1990s, when finally those three airlines made it a predictable process. In KQ’s case, enabled by the KLM partnership.

Initially, at least, that partnership also ended the political annoyances that previously accompanied any KQ travel.

Like heading to the airport for a plane down south, only to be held hostage at the airport, together with a couple hundred other passengers, for almost half a day. Why? A Kenyan minister had commandeered the plane.

So the goings-on of the past year or so are disturbing. Many explanations have been given. That the investments in new planes to service all the new African routes (as well as new routes into Asia) always meant a dip in profitability.

That loans for those investments, being dollar-denominated (at interest rates inexplicably well above European averages) meant huge exchange losses as the shilling steadily depreciated.

That fuel hedging — to protect us from oil price volatility — instead locked us into fuel prices well above the current prices.

It’s hard to make sense of. But what we can make sense of is relative costs and relative comforts. From a consumer perspective, KQ is increasingly not the best bet.

Its tickets are consistently higher than other options; it only retains its customer base because many like flights that are as direct as possible. Its comforts are ever more Spartan, annoyingly so.

KQ’s cost-cutting gurus may think we don’t notice the absence of salads or cheese or the overall shift in airline food suppliers to companies associated with the political who’s who. But we do.

They may also think we don’t notice the headsets that never get fixed. But we do. Or the second-rate entertainment products (despite the admirable push for more Kenyan content). But we do. Or the steady creep back of flight delays. But we do.

Unless delays and pricing go down, while services go up, KQ’s supposedly increased customer base will not be sustained.

KENYA: Kenya AirwaysTo Liquidate 600 Workers

Kenya Airways (KQ) will send home 600 employees in its rationalisation plan starting May 2016.

Airline officials hope the layoffs, which are part of the struggling carrier’s “Operation Pride” turnaround programme, will fly it to profitability.

The redundancies are likely to arouse a backlash from aviation workers’ unions, one of which has clashed with Kenya Airways on several occasions.

KQ Chief Executive Mbuvi Ngunze described the move as one of the “hard decisions” the airline has had to make to improve profitability.

He said the heavily indebted carrier would also re-examine its operating model and network and seek a long-term financial structure.

“The decision is not made lightly, and I want to thank all employees for their tremendous resilience and commitment in serving our guests in challenging times for the company.

“I am confident that with the support of all staff, unions, shareholders, creditors, financiers and all other stakeholders, Operation Pride will bring back the airline’s long term profitability and reconfirm our position as the Pride of Africa,” Mr Ngunze said.

The flag carrier hopes to recoup some Sh2 billion and spend it on various initiatives, mainly focused on increasing revenue and reducing costs.

KQ says its turnaround plan is on course, having disposed of some of her redundant aircraft and subleased others. The carrier also claimed to have reduced waste in catering, and renegotiated some contracts.

“So as to achieve these targets, the board has, after re-evaluating the various options, come to the painful decision that part of the required overhead savings will be derived from a decrease in staff headcount,” read a statement from the airline released late Thursday afternoon.

The 600 staff to be made redundant will be drawn from various departments and all cadres of staff. A list is being drawn detailing the specific positions to be eliminated.