Ending contract with KLM could have saved KQ Sh26bn
The IATA vice president for Africa says management failed to evaluate financial benefits from the partnership so it could not make an appropriate decision
Kenya Airways management could have ended the KLM partnership earlier to save the airline from last year’s Sh26 billion losses, the National Assembly Transport Committee was told yesterday.
The International Air Transport Association told legislators KQ management failed to evaluate financial benefit from the KLM partnership so it could not make an appropriate decision.
IATA vice president for Africa Raphael Kuuchi said most African airlines record huge losses annually due to high fuel costs and government taxes.
“No single airline can operate on its own. They should form alliances. However, there is need to look at the benefits from a partnership,” he said.
KQ signed partnership with the Europe-based KLM airline in November 2013 so they could expand their commercial synergies and optimise networks and flight schedules.
The joint venture increased their new routes to six for London– Nairobi, Amsterdam–Entebbe-Kigali, Amsterdam–Lusaka-Harare and Amsterdam-Kilimanjaro-Dar- esSalam.
The committee questioned why KQ is “sinking” yet KLM is “growing stronger”, despite their partnership.
“KQ ought to have left the partnership a long time ago. This is common knowledge that if you are making a loss and the other party is getting more than you, then either you renegotiate the partnership or pull out,” committee chairman Maina Kamanda said.
Kuuchi said African airlines recorded about a Sh70 billion loss last year, marking a Sh600 loss per passenger, despite costly tickets. Their European counterparts made Sh2,500 profits per passenger. He expressed fears they may make a loss of Sh50 billion this year.
Kenya Airways CEO Mbuvi Ngunze at Parliament Buildings after appearing before the Senate committee inquiring into the affairs of the airline on July 20 last year