Loss making Airliner: Where did KQ go wrong?

The national airline might be having issues with some financial institutions and just recently, it sought massive recapitalisation.

In other countries, airlines with such massive losses could have been closed. And with such performance, all directors should have resigned as it confirms poor management on the part of directors and top managers.

Such a board cannot meaningfully negotiate new investments, because if ‘merging’ with KAA is not new investments, then, what is it?

We will keep on asking the question: how come the planes are flying high but KQ books are showing huge losses? KQ itself should be the target for takeover so that her assets can be used profitably. The finance mainstream literature is clear on companies to be taken over. It is rare for loss-making companies to take over the management of profitable firms because they lack the capital to inject in the firms they have taken over.

Loss-making companies are unable to fund growth thus unable to attract new capital which is a prerequisite for acquiring other firms.

The practice is to starve the loss-making companies of capital. It is not clear whether the KAA suffers unproductive investment or suffers from organisational inefficiencies to warrant restructuring or takeover.

It is the inefficiencies in the targeted companies that allow profit-making firms to raid and turn them into profitable ventures.

KQ is not telling us the improvements they will make to the assets of KAA. 

If KQ was a private equity investor and the government was willing to privatise KAA, then such a deal would make sense, but that must be subjected to competitive bidding.

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