After several years of underperformance, Kenya’s national carrier, Kenya Airways (KQ) #ticker:KQ , looks all set for another leap of faith. Its management has unveiled a 10-year recovery plan that will commit the taxpayer to guarantee its loans amounting to $750 million (about Sh77.3 billion).
A key highlight of the recovery plan is a paper transaction that will see 11 commercial banks owed Sh22.8 billion replace Dutch airline KLM as the second largest shareholder bloc after the National Treasury. We welcome every effort to restore the financial health of the airline. To be sure, KQ is one of strategic national assets that Kenyans would wish to see soar to greater heights, again.
What we find unsettling is the failure to address the root causes of the KQ woes. The gradual fall of Kenya Airways — from the ‘Pride of Africa’ to just another of the continent’s struggling airlines — is well documented. Top executives made the wrong decisions that brought the airline to its present state.
When Parliament approved the recovery plan a few weeks ago, MPs minced no words in calling for the prosecution of executives who accumulated the huge debts. The forensic audit conducted by Deloitte is certainly a good starting point. That banks feature prominently in the bailout plan shows how deep and systemic the KQ’s saga cuts into the economy.
As the top shareholder, the National Treasury must lead the way in holding past managers accountable for their actions. It must make every deliberate effort to make poor corporate governance a painful and costly activity.
Asking past executives to give up their positions was a bold move but punishing them for wrongdoing will deliver the right message and take care of the moral hazard that we risk entrenching if we continue along current lines.
Anything short of that amounts to throwing good money after bad.
We also expect government to use its strength on the KQ board to populate the top management positions with professionals.
Again, the weak systems and poor internal controls identified in forensic audits must be addressed in the turnaround plan.