Already down 30 per cent year-on-year, the latest rout is set to push the stock into new multi-year lows. By the close of Friday, for the first time in more than seven years, the stock traded below Sh6, a level 95 per cent lower from an eight-year high at Sh137.

Clearly, investors have lost confidence in the stock and it’s likely that the situation could get worse in the coming months as they appear far from sold on the stock.

KQ’s persistent price underperformance is a reflection of both its external and internal troubles. A few of its external challenges include exchange rate volatility, fuel price fluctuations, intense competition from Middle East carriers, international regulatory environment and travel advisories making the operating environment extremely hostile.

Sadly, these factors are beyond the management’s control and hence unavoidable.

However, KQs management of internal factors (the only discretionary component) has been unsatisfactorily. Poor hedging policies, aggressive expansion plans (read aircraft purchases), weak industrial relations, excessive borrowings and poor service have also largely contributed to lacklustre performance in recent years.

Let’s explain this. Cash flow, a key indicator of the company’s ability to pay for aircraft purchases, has gradually fallen from Sh4.3 billion (2012) to Sh1.2 billion (2014), an equivalent of 72 per cent reduction.

This means that the Sh31 billion spent by the company on aircraft deposits in the past three years came primarily from debt which currently stands at Sh104 billion, up three times since 2012.

Persistent cash flow constraints have also meant a reliance on short-term financing which has risen by 155 per cent to Sh25 billion (2014) from the previous year in order to keep the business afloat.

Increasing finance costs has put more pressure on earnings and hence dwindling profits and zero dividends for investors.

Falling oil prices (fuel costs accounts for roughly 50 per cent of KQs total direct costs) led the company to write down the value of it fuel-hedging contracts worth Sh1.6 billion last year.

The company, which favours an aggressive hedging policy possibly as a result of its relatively old and less fuel-efficient aircraft, hedges at least 80 per cent of its anticipated fuel requirements through fuel derivatives.

Therefore, with oil prices projected at average of $60/barrel this year and $67/b in 2016 by the US Energy Information Administration (EIA), it is likely that KQ may be forced to again book losses for the remaining portion of its earlier hedges. Oil prices have fallen nearly 50 per cent since June 2012.

Furthermore, ongoing wrangles with the unions — Kenya Airline Pilots Association and Aviation and Airport Services Workers Union — has negatively affected investor perception of the airliner.

In the long run, I believe KQs saving grace lies in its planned re-organisation programme. This would involve selling of its non-core assets, review of its debt profile, re-negotiating of contracts, cheaper sourcing and a re-capitalisation possibly through another rights issue and would be a step in the right direction.