Big Guy against Small Fry. Boeing against Kenya Airways. Heard this story before? But that’s America’s problem: looking only at the short-term.
Last week Boeing stiffed Kenya Airways. Should KQ stiff Boeing back?
Probably one of the most successful companies in Africa, Kenya Airways is ruling that continent’s skies right now, and into the far foreseeable future. It is Kenya’s – indeed, East Africa’s – largest company. Its story is awesome: in a mere decade from a no-nothing local airline to a major carrier:
Its list of awards and accolades stretches from the Economist magazine to Warren Buffet. The two that stand out in my mind are Travel News & Leisure’s designation of KQ as the “African Airline of Preference”, and the 2009 global Aviation & Allied Business Individual Achievement award to its CEO, Titus Naikiuni, a home-grown Kenyan. (That award was notable because it was the first time in its history that the African organization gave such a prestigious award to any airline company other than South African Airways.)
Currently, KQ is listed as a 4-star business class airline by Skytrax which is widely used by commercial flyers for airline comparisons. American and United airlines are currently rated as 3-star, KLM and Brussels (which compete with KQ into Kenya) are rated as 3-star, and KQ shares its 4-star business class status with British Airways, Virgin Atlantic and Emirates.
(Qatar is the only 5-star airline that flies into Nairobi.)
But KQ is small, still, albeit growing by leaps and bounds. So of the 886 orders for Boeing Dreamliner 787s, KQ had only 5 orders with 4 options.
As I’m sure you’ve heard Boeing has delayed for the third time the launch of its 787. This has disrupted the KQ business plan enormously.
So KQ wants some compensation in the form of a renegotiated sales price. This is standard. American Airlines which is ordering 42 had no trouble renegotiating. But to KQ, Boeing said: take a hike.
This is stupid. American industry is simply too big. It’s so big that it can’t see the future. It looks only at the present, and usually, only at other big things.
One day, certainly in my childrens’ life times, KQ will be bigger than American Airlines. But 50 years is just too far too look.
Boeing is cutting off its nose to spite its face. KQ is one of the very few airlines left on the African continent that uses Boeing instead of Airbus. Its partners and part owners, KLM and Delta, are almost exclusively Airbus. It makes double sense, now, for KQ to stiff Boeing and move to Airbus.
And if that happens, it won’t be KQ that suffers. It will be Boeing. Maybe not in the next decade, but with some luck, the world may last longer than that.