In 2011, Kenya Airways launched, with much fanfare, Project Mawingu (Kiswahili for clouds), a statement of intent to take on its aviation rivals.
Core to the 10-year strategy was positioning Nairobi as a hub for flights from the East, notably from India and China, to drop off passengers from where the airline and its Sky Alliance partners like KLM and Air France would pick up fares to the rest of Africa and Europe.
While regionally this appeared targeted at Ethiopian Airlines, a Star Alliance member, and its Addis Ababa hub, its impact was also likely to occupy the strategists for Gulf carriers and their operating bases in the United Arab Emirates.
It is under this cloud that many of the recent moves by Kenya Airways can be put into context amid lingering questions on prudence and what-ifs arising from the apparent head-on collision between the airline’s strategies and hostile market forces.
“In a fast growing sector and when a company is doing well, the management can miss out on the nodes for strategy and end up misreading market conditions,” said an investment banker who has advised the airline and did not wish to be named.
Indeed, many analysts believe Kenya Airways may have missed the bus at some point over the past five years, first by giving Ethiopian Airlines a two-year lead time in bringing in Boeing Dreamliners, and, second, by getting its hedging instruments against fuel and forex movements wrong on occasion.
While Project Mawingu was supposed to move the carrier from a crisis manager to a keen competitor, it flew into turbulence with the Kenya Defence Forces launch of an offensive against Al-Shabaab in Somalia.
Constrained demand from passengers in the face of a runaway wage bill did not help matters, with personnel expenses more than doubling from $70m in 2007 to $157m in 2011 under union pressure.
After an absence of 18 years, the Uganda Airlines resumed service in August 2019 to Nairobi using 76-seat CRJ-900s. The type is still the backbone of the carrier, but its brand-new A330-800s from CRJ-900s to A330s touched base at Entebbe airport on Tuesday morning.
If Uganda Airlines is keen to develop Entebbe into a hub, as appears to be the case, it will need to strongly coordinate services to benefit from transit traffic, although this is of course lower-yielding.
Assuming it does properly coordinate its nine routes, London’s transit traffic potential excluding non-stop passengers who are unlikely to switch exceeds 245,000, Mumbai 112,000, and Guangzhou 79,000 and tap into labour externalisation to UAE.
First, commentators of various stripes, including many of us with no knowledge of the aviation industry, have underlined the rough market and stiff competition Uganda Airlines is jumped into.
Apparently, national carriers across Africa have for long been struggling to post consistent profits. Instead, they are a drain on the taxpayer who covers the losses to keep the airlines running. I find this argument unconvincing.
There is a limit to how long and with how much a loss-making business, with no other value at all, can be sustained by injections of capital from State coffers. If national carriers from South African to Ethiopian and Kenyan have struggled yet survived, then surely Uganda Airlines too can struggle in the market and live on. Why not?
The second argument, made by those imbibed with exaggerated neoliberal inclinations, is that government shouldn’t be doing business because it has no business doing business. In any case, critics point out, government has shown in the past that it is poor at running viable businesses. We can separate two things here.
It is one thing to have a government that is so incompetent as to efficiently supervise performing businesses, it’s another thing to say governments are necessarily poor at owning and presiding over public business ventures.
Mr Kasumba is an Information Scientist