Grounded in error – Ten fallacies acout Kenya Airways (Part one)

When Peter Drucker warned that “the greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic,” he might well have had Kenya Airways in mind. A recent television interview with a former employee illustrates the point with unwitting clarity.

The airline’s difficulties are neither novel nor uniquely Kenyan; they reflect structural shocks that have buffeted the global aviation industry. Yet these challenges have summoned a familiar chorus of self-styled experts, many drawing on experience from a bygone era, who prescribe solutions ill-fitted to today’s realities. Their arguments rest on assumptions that are no longer held.

Over the years, ten such fallacies have proved especially durable. Each continues to distort public debate. Each, in turn, merits careful dismantling.

1. CLAIM: Kenya Airways’ difficulties stem from the absence of aviators on its board and top management

VERDICT: False.

Airlines are not, as a rule, run by pilots. Many of the world’s most successful carriers are led by executives with backgrounds in finance, strategy or general management rather than in the cockpit. The chief executives of Turkish Airlines, British Airways, Air France-KLM and Qatar Airways, for instance, are not aviators.

Kenya Airways follows the same model. Its board, like those of its global peers, brings together a range of professional expertise, including finance, law, marketing and corporate strategy, skills essential to steering a complex, capital-intensive business.

Ten aviation lessons for dummies (with a side of humor)

This does not mean aviation expertise is absent. On the contrary, Kenya Airways’ senior management includes seasoned aviators whose technical judgement informs operational decisions. Because running an airline, like any other company, requires a multi-disciplinary team, pilots work with engineers, IT experts, finance and strategy gurus, amongst others, all of whom provide specialist insight when it matters most.

2. CLAIM: KQ receives generous government funding and diverts it to salaries rather than capitalising the business.

VERDICT: False.

Kenya Airways has indeed received state support over the years. But unlike the largesse extended to many of its global peers, this support has not taken the form of grants. Instead, it has been structured as a shareholder loan from the government, repayable with interest.

Nor has funding been frittered away on payroll. Much of it was deployed to stabilise the airline’s balance sheet by settling loans that fell into arrears during the COVID-19 pandemic, when the near-total closure of the global airspace deprived airlines everywhere of revenue. Kenya Airways was hardly unique in facing such distress; it was merely less generously treated.

A glance abroad puts the matter in perspective. Emirates Airlines received a grant of USD 4 billion to support its post-pandemic recovery. Singapore Airlines was handed USD 19 billion. American carriers, despite being privately owned, shared USD 56 billion in outright grants. Against this backdrop, Kenya Airways’ support looks modest. Indeed, the airline requires at least USD 0.5 billion merely to return to fiscal equilibrium

3. CLAIM: KQ fares are static and higher than those of most airlines.

VERDICT: False.

Like most professionally managed carriers, KQ relies on a yield-management system that prices seats according to demand and timing. The lowest fares are typically released up to a year in advance; as departure dates approach and availability tightens, prices rise, with the highest fares charged closest to take-off.

The airline also operates a classic hub-and-spoke model with Jomo Kenyatta International Airport as its hub and direct services radiating to destinations across the network. In aviation, direct flights almost invariably command a premium over itineraries involving a stopover. Judged against other airlines offering comparable non-stop services, KQ’s pricing is therefore broadly competitive rather than unusually expensive.

4. CLAIM: KQ leases its aircraft from Kenyan politicians with vested interests, explaining its persistent inability to turn a profit.

VERDICT: False.

KQ employs a combination of finance and operating leases. Under finance leases, ownership of the aircraft transfers to the airline at the end of the lease term; under operating leases, the aircraft reverts to its owners. In both cases, the lessors are large, internationally established financial institutions or aircraft-leasing firms, each managing fleets ranging from several hundred to well over a thousand aircraft. These firms are globally reputable and lease aircraft not only to KQ but to dozens of airlines worldwide.

5. CLAIM: KQ overpays its employees, thereby eroding its competitive edge.

VERDICT: False.

For much of the past decade, the airline suffered the opposite problem. Wages stagnated, prompting an exodus of skilled staff to better-paying rivals. People with aviation industry skills, like engineers, pilots, and revenue management experts, are in great demand globally. As such, their skills are remunerated based on worldwide scales and not local ones.

Only recently has remuneration improved at KQ, and even now, pay levels remain toward the lower end of industry benchmarks. The effect of these adjustments has been marked. Staff turnover has fallen from a peak of 9 per cent to just 2 per cent last year. At one point, nearly 89 engineers left at one go; retention has rebounded sharply. An employee satisfaction index now exceeds 80 per cent, its highest level on record.