What Treasury bailout means to KQ

Opinion and Analysis

A Kenya Airways Boeing 777-300ER at the Jomo Kenyatta International Airport, Nairobi. PHOTO | FILE 

By  TONY WATIMA

In Summary

• It may be hard for KQ to snub summons when its debt lifeline approvals lie with Parliament.

Years ago when I worked for Kenya Airways (KQ) as an intern, I was under the stewardship of a jovial man who was just a few months away from retirement.

He had been at the airline since 1977; that time the East African Airways.

He would narrate many stories about how the airline evolved and stayed afloat over the years.

He told of a story in the early 1990s when a powerful Cabinet minister in the Kanu government recalled a Europe-bound plane that had just taken off and diverted it to South Africa.

The politician with his entourage where dropped off before releasing the plane to head for its initial destination.

He explained that it was not an easy task for the airline to cut political ties with bureaucrats, under the leadership of Duncan Ndegwa who was hell-bent in turning the airline around.

Kenya Airways’ woes started after the Douala plane crash in 2007 that killed 114 people.

Just two years after the Cameroon tragic accident, the national carrier reported its first loss and continued to tumble.

Kenyans’ unconditional love and cherished pride for the airline have clouded many from seeing the recurring losses. I agree that we should not watch the national carrier plunge.

But from an economic point of view, an operating loss cannot be knocked off the financial books with a one-day cheque settlement.

It requires a neat managerial tapestry than just correcting the accounting books with a bailout lifeline.

KQ has been carrying losses since 2012. This year, it sought the help of a financial advisor to help restructure its debt. A year on, the Treasury is extending a Sh4.2 billion debt.

Isn’t that indicative of credit unworthiness?

A cash bailout from the government should not have been the first, but rather the last option on the table.

For a publicly listed company at the Nairobi Securities Exchange to be rescued by the government, is it a market pointer that the airline has reached its shell life? Is the government gambling to have the eagle fly back to the skies?