Personal Finance

Why Kenya Airways call for protection is unwarranted

kq

Protectionism stifles quality and pricing. FILE PHOTO | NMG

Kenya Airways #ticker:KQ recovery plan has been interesting with several proposals laid out.

The plan has had its fair share of legal challenges, including labour matters such as Alex Mbugua’s case against the airline. I have been following the KQ case closely and a report of September 21 this year said the airline had sought government protection against rivals.

The government is the leading shareholder and it would be in its interest to protect KQ from competition.

According to reports, the airline urged the government to slow down the licensing of new airlines to Nairobi in the hope that the step would prevent the competition from eating into its market share.

KQ further argued that some of its major competitors, especially foreign airlines, enjoy protection from their own governments.

The argument brings into focus an interesting topic on protectionism versus competition in the aviation industry.

The argument for protectionism is that a government can use its influence to limit operations of foreign airlines in Kenya.

For example, through imposing stricter licensing terms. The question is, is protectionism the best way to go?

It has been argued that protectionism is bad for the overall economy in terms of trade and tourism. The argument is that in as much as it may save the airline, protectionism may have negative effect on tourism which is the country’s mainstay.

Further, protectionism is against the Yamoussoukro Declaration of 1999 which provided for liberalisation. Protectionism is certainly uncompetitive as it restricts competition in foreign markets and does not uphold consumer welfare.

This is because it limits consumers’ right to choose whereas competition increases diversity and offers them a wide range of services and goods to choose from. Protectionism stifles quality and pricing.

I do not understand how plausible the argument for protectionism is, considering that KQ does not operate only in Kenya but on other routes as well.

It would have been a good strategy to undertake if the airline operated in Kenya only. Protectionism is also against the open sky policy, which calls for international airlines to liberate their airspace and create a free market.

Some experts, however, argue that protectionism is a boon for regional airlines threatened by stiff competition.

In my view, protectionism should be balanced with consumer welfare and an overall assessment of the impact it would have on the economy. It is also not in line with some international declarations and policies.