Kenya Airways does not deserve taxpayer bailout

H.A. Ironside said: “Desperate diseases require drastic treatment.” The allocation of Sh37.3 billion in this financial year to support restructuring at Kenya Airways (KQ) and Kenya Power in a bid to bail them out of financial turbulence is not only saddening but repugnant. 

A reliable source was cited as saying the National Treasury could spend a whopping Sh54.8 billion to bail out struggling parastatals, also known as state-owned enterprises (SOEs), where KQ will receive Sh34.95 billion and Kenya Power Sh2.35 billion.

In 2013, KQ was indebted to the tune of Sh7.9 billion and has since been making losses. In the 2021 financial results, the national carrier announced a Sh15.8 billion loss, further deep from a Sh36.2 billion hole the year before. While the airline has tried to reduce its financial losses, it remains cash-strapped. It is struggling with a Sh102.82 billion debt and, by last September, had received Sh10 billion from the Treasury to reduce its indebtedness. 

A reliable report shows the government owns 48.9 per cent of KQ while Kenyan banks and Dutch carrier KLM own 38.1 per cent and 7.8 per cent, respectively, while the public owns the rest through listed shares at the Nairobi Securities Exchange. Hence the government’s vested interest in the airline.

Mismanagement

KQ blames its financial woes on high fuel prices, the Covid-19 pandemic and related lockdowns, operations and maintenance costs, distribution costs and salary expenditures among other recurrent expenditures. But also, mismanagement, maladministration, financial imprudence and dissipation cannot be ruled out. For instance, the 1995 joint venture with KLM can be termed the genesis of all the mountainous debt plaguing KQ. And the KQ management cannot be exonerated from blame.

Last month, KQ pilots went on strike and paralysed operations at the carrier. They were demanding pay increases as well as the removal of the chief executive officer, Allan Kilavuka. Upon assuming office, Mr Kilavuka had promised to turn around KQ from a loss-to-profit-making outfit. But contrary to his expectations, the financial woes are piling up.

While the proposed sale of KQ has been met with widespread opposition, it is time the government declared the “The Pride of Africa” insolvent and privatised it. Thankfully, last month, the International Monetary Fund set tough terms for KQ bailouts to prevent the wastage of taxpayer funds.

One wonders: How come the Kenya Kwanza Alliance has scrapped all fuel and maize flour subsidies as being imprudent but can afford bailouts for struggling parastatals? More than five million Kenyans face starvation and grinding poverty. Yet the government has money to burn amid astronomical commodity prices and ballooning public debt. 

The buck stops with the government. “But as George Bernard Shaw remarked, a government that robs Peter to pay Paul can always depend on the support of Paul”.

Mr Muthama, a business and strategic management lecturer at JKUAT, is a consultant and author. [email protected].