Don’t run airlines, African governments told
African governments have been advised to stop running airlines and leave the business to private operators.
Kenya Airways chief executive officer Titus Naikuni said yesterday on the sidelines of an investors’ breakfast briefing in Nairobi that government-run airlines were unsuccessful.
“My advice to Tanzania and other African countries is that if they want to have profitable national carriers they should move the airline business from the governments. A government can still have some ownership but let the people who know how to run an airline do it,” he said when fielding questions from Tanzanian journalists on what lessons governments could learn from Kenya Airways (KQ).
The Kenyan government is not involved in running the airline although it has a 23 per cent stake. The KLM has 26 per cent while 61 per cent of the shares are owned by public investors across the region.
The Air Tanzania Company Limited (ATCL) is on its death throes after an unsuccessful partnership with the South African Airways.
The government retook over its operations but things have worsened.
The government has been looking for private investors for a partnership. But experts have advised it to liquidate it and start afresh.
Mr Naikuni ruled out any possibilities of having a future relationship with ATCL as they tried in the past.
“We already have a good relationship with Precision Air through a 49 per cent ownership. Why should we need the second airline in Tanzania? Why don’t we look at a relationship between ATCL and Precision Air, for example?” he said.
But Precision Air, managing director Alfonse Kioko said told The Citizen that the airline was not looking for any possibility to buy shares in ATCL although it was open to discussions.
“We tried in the past to acquire some stake in the ATCL when the government was looking for an investor but the response was not positive. So we gave up. We are, however, open to any kind of relationship, not necessarily through buying shares,” he said.
Earlier, KQ group finance director Alex Mbugua told the briefing that the airline had posted an after-tax profit of Ksh2.035 billion in the financial year 2010 compared with the loss of Ksh4.08 billion in 2009.
This was a net profit margin of 2.9 per cent and an increase in an earning per share of 149 per cent over a previous year. The profit made in 2010 was largely due to a 23 per cent decrease in operating costs to KSh5.7 billion during the period.
“The significant drop in fuel costs was primarily driven by lower jet fuel prices which declined by 29 per cent,” Mr Mbugua said.
The airline paid KSh636 million taxes in 2010.
The board has recommended the first and the final dividend of Ksh1.00 per share pending the approval by shareholders at an annual general meeting in September. This represents the total dividend Ksh462 million.
Earlier, Mr Naikuni said the airline’s prospects for 2011 were better due to signs of recovery in the global aviation industry.
“The global economic recovery that is emerging in the West, Middle East and the Asian economies is expected to flow into Africa and the Kenyan economy. This should, in turn, improve the prospects for Kenya Airways in 2010 and beyond,” said Mr Naikuni.
KQ will acquire nine new aircraft from Boeing this year as part of an expansion plan which will also involve launching new routes in African countries.
Source – The Citizen