Kenya Airways (KQ) flagged-off its inaugural flight from the Jomo Kenyatta International Airport (JKIA) to New York City on October 28, 2018.
As the first-ever non-stop flight from Nairobi, it is a breakthrough for Kenya following years of negotiations.
Several months later, the hype on the route seems to have died with Kenya Airways not publicising it as much as it did the launch.
The habitual loss-making airline reported a KShs7.6 billion loss in 2018, an increase from the KShs6.4 billion in FY17. The airline attributed the losses to a “surge in operating costs”.
Despite the lacklustre performance of the airline, senior executives continue receiving huge salaries.
Senior KQ executives’ salaries
Kenya Airways is one of the 12 Nairobi Securities Exchange-listed companies burdened by compensating their executives.
The companies are collapsing under this liability which shareholders do not appreciate.
This is against the backdrop of lack of profitability and turning the companies’ fortunes around.
KQ is second only to cement maker ARM in compensating its executives.
The others are TransCentury, Deacons, East African Cables, Home Afrika and Express Kenya, Sameer Africa, Sanlam Kenya, HF Group, BOC Kenya and Flame Tree Holdings in that order.
Early this year, outgoing KQ CEO Sebastian Mikosz denied earning Kshs8 million per month following reports that appeared on social media.
Mikosz said he earned KShs 2.7 million that is also subject to 29 per cent income tax payable to the Kenya Revenue Authority (KRA).
He also denied that a coterie of 21 expatriates heads the national carrier. Combined, they were said to take home KShs70 million per month in salaries.
Mikosz said in a statement to newsrooms that KQ employs 18 foreigners.
Five of these are KLM managers seconded to Kenya Airways with 2 of them occupying the senior positions of the chief operating officer and head of global sales.
As a board member, former Safaricom CEO Michael Joseph earns Kshs3 million while his predecessor earned Kshs 300,000 per month.
Catherine Kamau who is in KQ’s Human Resource Management was reportedly earning Kshs 1.3 million a month.
During the strike which paralysed operations at JKIA in March, the Kenya Aviation Workers Union (KAWU) Secretary General Moses Ndiema accused KQ’s top management of financial wastage.
The protest was against the planned takeover of the airport by Kenya Airways.
Kenya Airways new routes, cumulative losses
Over the past six years, Kenya Airways has accumulated KShs 89.3 billion in losses as of May 2019. This followed the release of its latest results where the airline announced a net loss of KShs 5.9 billion from KSh5.1 billion for the year ended December 2018.
While Kenya Airways continues blaming operating costs, the airline has been on a new route launching spree with the latest being the Rome, Italy, and Geneva, Switzerland.
In 2018, there were over 65,000 tourists from Italy visiting Kenya and this is one of the reasons KQ is launching the route.
The introduction of these routes is part of Kenya Airways’ network expansion strategy steered towards growing its market share, increasing revenues and financial turnaround.
Mikosz says, “With 5 European destinations and 55 worldwide from Nairobi, KQ offers Africa the best connectivity to the rest of the world and vice versa.”
Geneva is a renowned global hub for diplomacy and banking. The city hosts many international organizations including the United Nations (UN).
The new route, KQ says, complements Nairobi which is Africa’s hub for the UN among other international agencies.
“The launch of this direct route completes the circuit across the UN Headquarters in New York – Nairobi –Geneva, making logistics and connectivity easier for travellers.”
Kenya Airways is deploying its 787 Dreamliner four time a week to cover the new routes. The routes are already dominated by Swissair.
Only Ethiopia, Egypt, Morocco, Nigeria, Senegal, Ghana, Cape Verde and South Africa directly fly to the US.
Bleak outlook for airlines’ profits
Africa has only three major intercontinental airlines and only one is profitable.
Ethiopian Airlines has over the years built its reputation beating Kenya Airways and South African Airways to remain the only money-making national carrier on the continent. Ethiopia Airlines is not managed by the government while the others continue incurring hundreds of millions in losses every year surviving on government bailouts.
SAA and KQ are among the airlines that have to contend with this reality.
In a report, IATA says that the losses in 2019 will be due to the low load factor and the high cost of operations. The cost of fuel is the biggest culprit.
IATA projects that demand will grow at a slower pace of 4.3 per cent this year down from the 6.1 per cent in 2018.
The African airlines will grow at an even slower rate of 3.7 per cent this year in comparison to the 4.3 per cent recorded last year.
Each passenger carried will lead to a -1.0 per cent net margin costing the carriers USD1.54 (Sh154).
The report adds losses for Africa airlines will remain unchanged from 2018 at USD0.1 billion. This trend has been ongoing for the past three years.
Globally, 2019 will be the worst year since 2014 where some airlines will make losses.