Here are our views on the news making headlines today for Kenya:
KQ’s dilemma: Continue with current strategy or craft new one. Last week, KQ reported a loss of Sh25.7 billion. The management attributed this mainly to external factors, including competition from Middle East carriers, travel advisories, runway closures for renovation and the Ebola outbreak in West Africa. In other words, KQ is blaming the external environment.
Our View: Even though external factors played a role in the record-setting KES 25.7 billion loss which has wiped out shareholders’ wealth, however the main reason was that KQ had an overly ambitious expansion plan dubbed ’Project Mawingu’ where the carrier opted to buy new planes instead of leasing amid lower than expected revenues which saw the financing costs sky rocket, accelerated depreciation charges.