CHAPTER ONE

INTRODUCTION
1.1 Introduction
The chapter present the back ground of the study, problem statement, objectives research
questions, scope of the study justification, conceptual framework and limitations.
1.2 Background Information
Sustainability has since been widely interpreted as achieving the continual balance of social,
economic and environmental imperatives. When applied to aviation, however, this broad
sustainability concept is often constrained to mean reduce environmental impact as much as
possible, with lesser focus being given to aviations more positive contributions to both local
and global sustainability. In fact, aviation brings significant sustainability-related benefits, such
as freedom of mobility and health and welfare improvements through poverty reduction. It also
promotes substantial economic benefits through employment opportunities and facilitating trade
and business
According to The Air Transport Action Group - ATAG (2012), the sustainability concept calls for
a proper balance between three basic interrelated pillars: Economic, social and environment: in
economic growth is vital for technological advancement and the investment required to improve
social services, Social: people should be included in discussions and decisions that impact on
their communities and the Environmental: production and consumption should advance in a way
that does not diminish the worlds natural resources, now and for the generations to come.
ATAG (2012) continued to note that sustainable development is especially relevant to the air
transport industry, which is recognised as an essential link to the global economy. Air transport
makes a valuable and unique contribution to our society and the efficient and affordable access
it provides to markets helps improve living standards and foster economic growth. This, in turn,
alleviates poverty and results in reduced environmental degradation. Air transport is one of the
worlds fastest growing industries, evidenced by the demand for air travel that increased threefold between 1980 and 2000, and that is set to double by 2020. This illustrates how essential the
industry is to modern life; few people could imagine or would want a world without air travel

since the benefits of being linked to all regions worldwide via a network of air routes are
increasingly significant in terms of access, time savings, economic benefits and safety and the
nationals airline should strive for the sustainability in the region in order to meet the three pillars
used to measure the sustainability i.e. economic, environmental and the social aspects.
From an economic point of view, air transport is essential for world business and tourism. It
creates jobs and facilitates the expansion of world trade by opening up new market opportunities.
It also attracts businesses to locations in the developed and developing world thereby satisfying
the mobility requirements of a growing portion of the worlds population and moves products
and services quickly over long distances enabling economic and social participation by outlying
communities. From a social perspective, air transport forms a unique global transport network
linking people, countries and cultures safely and efficiently.
It is increasingly accessible to a greater number of people who can now afford to travel by air for
leisure and business purposes. In environmental terms, air transport has been able to reduce or
contain its environmental impact by continually improving its fuel consumption, reducing noise
and introducing new, more sustainable technologies (www.airport-int.com 2012)

1.2.1 Concept of Airways Sustainability

A growing number of writers over the last quarter of a century have recognised that the activities
of an organisation impact upon the external environment and have suggested that such an
organisation should therefore be accountable to a wider audience than simply its shareholders.
This concern was stated by Ackerman (1975) who argued that big business was recognizing the
need to adapt to a new social climate of community accountability, but that the orientation of
business to financial results was inhibiting social responsiveness. McDonald and Puxty (1979).
This influence is so significant that it can be argued that the power and influence of these
stakeholders is such that it amounts to quasi-ownership of the organisation. Indeed Gray et al.
(1987) challenge the traditional role of accounting in reporting results and consider that, rather
than an ownership approach to accountability, a stakeholder approach, recognising the wide
stakeholder community, is needed. Moreover Rubenstein (1992) goes further and argues that
there is a need for a new social contract between a business and its stakeholders.

Central to this social contract is a concern for the future which has become manifest through the
term sustainability. This term sustainability has become ubiquitous both within the discourse of
globalisation and within the discourse of corporate performance. Sustainability is of course a
controversial issue and there are many definitions of what is meant by the term. At the broadest
definitions sustainability is concerned with the effect which action taken in the present has upon
the options available in the future (Crowther, 2002).Sustainability therefore implies that society
must use no more of a resource than can be regenerated. This can be defined in terms of the
carrying capacity of the ecosystem (Hawken, 1993) and described with input-output models of
resource consumption. Sustainability of airways includes both financial viability and institutional
sustainability (self-sufficiency) social and environmental sustainability (Sharma and Nepal,
1997). The frames of reference in airways definitions are therefore, more financial,
administrative and institution focused. The various factors that affect the sustainability of the
Kenya Airways have not been studied to indicate how they affect the airline and this study will
focus on the determination of the same.

1.2.2 Kenya Airways

The airline was established in January 1977, after the breakup of the East African Community. It
started operations on 4th February 1977 and was wholly owned by the Kenya Government until
the Kenyan Government, outlining the countrys need for economic development and growth,
published April 1996.In 1986, session paper number 1. The document stressed the government
opinion that the airline would be better off if owned by private interests, thus resulting in the first
attempt to privatize the airline. The Government named Mr. Philip Ndegwa as the Chairman of
the Board in 1991, with specific orders to privatize the airline. In 1992, the Public Enterprise
Reform paper was published, giving Kenya Airways priority among national companies in
Kenya to be privatized.
In the fiscal year 1993-1994, the airline made its first profit since the start of the
commercialization. Also in 1994, the International Finance Corporation was appointed to provide
assistance in the privatization process. In 1995, Kenya Airways went through some important
financial processes that included; using the restructuring of its debts and a master corporation

agreement with KLM. The headquarters of Kenya Airways is in Embakasi, Nairobi with Jomo
Kenyatta International airport as the hub. Its geographical spread includes many countries in
Africa, Some in Europe and Asia. It specializes in Cargo, Passengers flight both domestic and
international. In the year 2010 it was voted to be the most respected company in East Africa and
it has won many awards as the best airline in Africa in In-flight magazine among others. Kenya
Airways is the leading operator on domestic routes. It operates 67 flights a week to four domestic
destinations; Mombasa, Malindi, Kisumu and Nairobi.

1.3 Statement of the Problem

The environment in which organizations operate is dynamic and changing meaning therefore that
those organizations that will survive and succeed are those that will embrace change. The pace of
change is accelerating and all organisations, if they are to benefit from continued survival, must
be prepared not only to respond to, but to anticipate, change, Senior & Flemming (2006).
Organizational sustainability depends on the determination by the management to position the
organisations well enough to fit into the environment. There is need to make sound decisions at
present in order to avoid limiting the choices of generations to come. When an organisations
consumes virtually all its assets to serve the present users, it denies the benefits of the
organizations service to future users (Herzlinger, 1999). Despite the many factors affecting the
sustainability of the firms, there is limited research in the area of airlines and this has led to the
study of the same in the Kenya Airways. No local or international study has been carried out on
the factors that affect sustainability of airline in Kenya. Given the inability of most some of the
local airlines in Kenya to rise up to the sustainable levels, this research seeks to investigate the
factors that affect sustainability of KQ in Kenya.