All businesses have challenges, more so in
our aviation industry, which is cyclical in
nature and fraught with many risks.
These include fuel price volatility, intense
competition and more recently the threat
of terrorism and epidemics that have adversely impacted global travel. There is
also political instability, natural disasters
and an increasingly tight regulatory
environment and KQ is not isolated from
any of these. KQ has expanded its global footprint
across multiple jurisdictions flying to 52
destinations. As a global airline, we are
governed by stringent international
aviation rules that we must adhere to. Strong consumer activism in some
markets like the European Union (EU) has
imposed high costs of operations in cases
of schedule interruptions. But it has not always been doom and
gloom. Over the last decade, Kenya
Airways worked hard to successfully shed
the image of an ailing airline dependent
on government lifeline. Since it was privatised in the late 1990s,
the airline grew rapidly, lifted by strong
fundamentals and embracing a culture of
competitiveness and innovation. Before
the current spate of challenges, KQ was
one of the most profitable airlines even earning the ‘Most Respected Company in
East Africa’ accolade. Are we in debt? Yes we are. Is this
normal for airlines? Most certainly. The
question is one of balance for both long
term and short term debt. Long term debt
is the norm for financing asset
acquisition together with equity. In the short term, we are experiencing a tight
liquidity position driven by our business
environment. Were we too ambitious in our plans? Only
time will tell. KQ from 2002 to 2011 grew
from a turnover of Sh25 billion to over
Sh100 billion, in the same period. It only
made a loss in 2009. Against this
backdrop, the Board embarked on a second phase of growth and renewal with
mixed results thus far. Operationally, we have seen significant
improvements over the last two years
both in on time performance and service.
In the last month though, we have had
significant disruptions to our schedule
integrity which has regrettably impacted our loyal customers for two reasons. Firstly, the change of schedule due to the
runway closure and attendant internal
adjustments we have had to make. Secondly, we have had labour relations
issues with some of our pilot community
which in some instances has led to last
minute flight cancellations or delays. So, whereas KQ may today be grappling
with challenges, what is important is that
we stay focused in delivering on the
wider promise. What matters most is the
measures instituted to put the business
on a recovery path and ultimately on a sound footing.
COOP, IMH, KEGN, KQ, MTNU