What SAA Can Learn From Kenya Airways

While South African Airways is receiving bailouts from National Treasury, Kenya Airways (KQ) has cut losses by 51% this year thanks to their turnaround strategy. KQ recorded a loss of $260.9 million in 2016 which was reduced to $98.8 million in 2017. The airline, which is 29.8% owned by the Kenyan government, appointed Polish Sebastian Mikosz (who served as the CEO of Lot Polish Airlines) as the new CEO in June to oversee the turnaround plan which includes fleet downsizing and debt restructuring.

KQ recently sold two Boeing 737 airplanes, they also cut jobs, sub-leased airplanes to other airlines, appointed PJT Partners (an advisory focused investment bank) as their transaction advisor and reduced their fuel costs.

The strategy was developed with the help of US management consulting firm Mckinsey and Company however the contract with the firm was terminated earlier this year. According to an article on nation.co.ke,  the airline will instead buy services from McKinsey on-a-need basis depending on the availability of resources.

This is what happens when businesses face a financial crises, they hold key individuals accountable, come up with strategies/plans and altar the way the business is operated in order to make profits. It is what SAA should be doing but has no need to because of it’s frequent bailouts.

The government has been bailing out SAA for years now, according to CEO of business leadership SA, Bonang Mohale, R50 Billion has been spent on SAA since 1999. What I don’t understand is why the government is refusing to sell the airline, why do they need to own an airline (KQ was privatised in 1996 and is listed on the Nairobi Stock exchange). It is also unfair competition to other airlines because SAA has an unlimited access to funds and they don’t even need to make money to remain operational.

The purpose of a business is to provide a product/service and to make a profit, otherwise it becomes a liability to the owner. SAA is a liability to the government therefore it is a liability to tax payers so I think it should be sold.

 

You may also like

Leave a Reply

Your email address will not be published.