OPINION: KQ’s bleak future as COVID 19 digs in

By Joseph Bonyo

As the last of Kenya Airways plans taxi to parking at the Jomo Kenyatta International Airport (JKIA) later today (Wednesday, March 25), it will open it up to a new future.

Globally, airlines have taken a hit as the COVID-19 pandemic takes a toll.

The International Air Transport Association (IATA) has revised revenue losses by the industry no less than twice. The latest estimations it says airlines could lose up to $252 billion.

For Kenya Airways, as one of IATA members, this will be a painful loss. The airline has been bleeding and attempts to forestall this have yielded little.

In its last financial notice, the listed carrier issued a profit warning noting that its earnings for 2019 would be 25 per cent lower than the previous year.

KQ has often indicated that its China was one of its lucrative routes. With JKIA being a regional hub, the airline enjoyed ferrying passengers and cargo between the east and Africa.

The suspension of this route in late January had by the end of February saw the carrier loss up to Ksh800 million. The route was popular with African businessmen and women who shop in Guangzhou

Amidst protest from many Kenyans, KQ had maintained most of its destinations including Covid-19 epic centres. The decision most financial analysts opined was necessitated by its weak financial health.

With the pressure pilling and the pandemic spreading globally, it was forced to cut down on frequencies and suspend some routes.

But a decision by Kenya’s National Emergency Response Committee on coronavirus last week pulled the rag under KQ’s feet. The suspension of all international flights in and out of Kenya was occasioned by rising imported cases of Covid-19.

As such, Kenya Airways in compliance will ground most of its aircrafts in Nairobi as well as final destinations of departing flights from JKIA today.

This chapter on the airlines history will have to be written, telling a tale of a bleak future.

Across the world, a number of airlines have already indicated they will go into receivership if the pandemic continues.

“Without immediate government relief measures, there will not be an industry left standing. Airlines need $200 billion in liquidity support simply to make it through,’’ says IATA’s Director General and CEO, Alexandre de Juniac

In this regard, some government’s like Australia, China, New Zealand, Brazil and Norway among others have instituted rescue packages for their airlines.

Others like the United Kingdom have indicated it would only intervene as last resort encouraging carriers to seek bailout from shareholders.

For Kenya Airways none of these options maybe on the table in the short term. It is no secret that it was facing financial distress before this pandemic.

In February, the National Treasury came through for it with a Ksh5 billion package to partly shore up its capital as well for servicing its E190 Embraer fleet.

A month before that, the government had already written off an estimated Ksh20 Billion in loans for the carrier to grant it a new lease of life.

Grounding its operations to a halt due to the pandemic therefore spells doom for the carrier. The Kenyan government may be too preoccupied with resuscitating the general economy after this to keep its eyes on the airline.

Already, the National Treasury has reviewed Kenya’s 2020 economic projections to 3.4 per cent from a previous 6.1 per cent estimates.

The Central Bank of Kenya has also revealed that Kenya has made an estimated Ksh110 billion shillings request to the World Bank and IMF to help mitigate the effects of Covid -19.

All these puts Kenya Airways in a precarious position as it maps out its come back plan after the pandemic. This will also slow down its expected nationalization that has been pending at both the legislative and cabinet level of things.

As it prepares to release its 2019 financial year report before the end of March 31 2020, Kenya Airways can only console itself with the words of IATA boss…

“Airlines are fighting for survival in every corner of the world. Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business. For airlines, it’s apocalypse now,” Alexandre de Juniac (IATA DG and CEO) in the latest statement on the state of global aviation industry.

Joseph Bonyo is Citizen TV Business Editor.


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