In a world consumed by profits as a metric of any success, progress is measured by the growth of the bottom line. Embedded deep in the psyche is the idea that success can only be evident where there is a healthy balance sheet. But is it?
In aviation, progress is not only about profitability. It is the sum total of several moving parts which contribute to the whole. Kenya Airways is an example. The recent results announcing an operating profit for the first time in six years are a result of the multiple levers that we are pulling. That our concerted efforts are now coming to fruition, evinced by this progress, makes us all very excited.
I would first want to briefly interrogate what I consider the main reasons why the airline found itself in dire straits. At some point in the past, the airline got into an expansion drive. This was informed by the need to increase our footprint within the continent and beyond. The expansion drive, aptly named Project Mawingu for its lofty aspirations, necessitated the acquisition of new aircraft.
But Project Mawingu flew into headwinds. First, the acquisition and delivery of the Boeing 787 Dreamliner aircraft, integral to the programme, was delayed by three years. Then came a series of unfortunate events that further threw a spanner in the works. The dreaded Ebola virus afflicted most of West Africa, a region crucial to the expansion drive. Shortly after that, the Westgate terror attack happened on Kenyan soil. This, and the subsequent Garissa terror attack, led to travel advisories that decimated traffic from Europe.
Other significant events that had inimical effects on the carrier were the war in Central Africa and the fact that international arrivals at Jomo Kenyatta International Airport, burnt down. Compounded, these events slowed down the growth of the airline.
This was even as other airlines, particularly carriers from the Middle East, were beginning to spread out their wings aggressively into Africa, with a bagful of incentives, subsidies, and funding! One of the difficulties that the airline faced was that it was not properly capitalised for the planned growth. It needed a massive dose of capital injection to compete on the same footing as its Middle Eastern competitors and fuel the anticipated growth.
As a result, debt was taken which turned out to be the Achilles heel. In 2020 when I took over as CEO and GMD, we put together a plan to redress this under capitalisation alongside other operational challenges so as to reclaim our status as the Pride of Africa.
But the advent of the Covid-19 pandemic in March of 20202 quickly changed our plans because our entire flying business, and that of the whole world, ground to a halt. Our focus then shifted to surviving the pandemic.
Because the world appears to have recovered and moved on, the impact of Covid-19 is grossly underestimated. Before the pandemic, Kenya Airways needed a capital boost of $1B. However, due to the impact of the drain on cash and accumulated obligations during the grounded period, this need has grown substantially.
That notwithstanding, there has been a renewed focus to get KQ back on track. We christened this process Project Kifaru. The first phase of Project Kifaru has already been executed successfully. This is what has led to KQ’s operating profit this half year.
The writer is the group managing director & CEO, of Kenya Airways.
