The announcement by the Kenya Airways management that the company had made Sh25.7 billion losses in the past one year sent shockwaves all round and brought to the fore the question of corporate governance.
For three consecutive years, the national carrier has posted negative results that signal that the fundamentals have been wrong.
However, no drastic action seems to have been taken to reverse that trajectory.
But the latest loss is mind-boggling for an airline that only a few years go was truly and emblematically the pride of Africa.
Explanations have been given about the cause of the massive loss, including high fuel prices, terror that cut tourism as well as tragedies like Ebola.
But the critical fact is that the company is suffering from a misguided strategy that anchored expansion on borrowing.
When evaluated in terms of assets and liabilities, the company is technically insolvent.
The reason why the company’s fortune is worrying is that it is partly owned by the government, which means, it is publicly funded.
Secondly, the airline has come to represent the international image of the country.
It is a key player in the African aviation industry with flights to key and strategic capitals.
Further, the expansion of Jomo Kenyatta International Airport and development of other related infrastructure, including the proposed Greenfield airport project, have been tied to the growth of the airline.
Any misfortune that hits the national carrier affects these projects.
Thus far, the company’s management has set out to borrow more to keep afloat and sell assets to raise cash to offset debts.
Clearly, the turnaround model is uninspiring.
A fiercely ruthless decision has to be made, including reviewing the partnership with KLM, as a more robust strategy is deployed and investigations conducted to expose the cause of the haemorrhage.