Macroeconomic Factors and Profitability of Domestic Commercial Airlines in Kenya
| dc.contributor.author | Kaki, Nduku Nelius | |
| dc.date.accessioned | 2026-02-11T13:23:00Z | |
| dc.date.available | 2026-02-11T13:23:00Z | |
| dc.date.issued | 2025-10 | |
| dc.description | A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillement for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, October, 2025 Supervisor: 1.Ambrose Jagongo | |
| dc.description.abstract | The airline industry contributes to a country's economy by facilitating trade, tourism, revenue generation, and job creation. Thus, it is an essential sector of a country's economy. However, the industry has faced financial challenges as most companies have recorded a negative Return on Assets in consecutive years. Evidence from other sectors has linked macroeconomic factors to profitability. However, there is insufficient evidence on macroeconomic factors effects on Kenyan domestic airlines' profitability. The problem the study sought to address is the declining trend in Kenyan domestic commercial airlines' profitability, whereby they have been recording negative returns on assets. The purpose of the study was to examine macroeconomic factors' impact on Kenyan domestic commercial airlines profitability. The objectives were to investigate the effect of inflation, interest, and exchange rates on Kenyan domestic airlines profitability. The project is significant to the management of domestic commercial airlines in understanding how changes in the macroeconomic environment influence the financial performance of the companies to enable them to adopt relevant strategies. The theories that support this study are agency, deflation, Fisher's, and purchasing power parity theories. This research project used descriptive design. The research targeted the 13 domestic commercial airlines in Kenya, which were actively operating from 2019 to 2023. Census approach was used to gather the sample. Secondary data on profitability were obtained from the 13 companies' websites. The Central Bank of Kenya website provided macroeconomic data. A data collection sheet aided in data collection. The researcher conducted descriptive and inferential analyses. Diagnostic tests such as multicollinearity, stationarity, homoscedasticity, autocorrelation and normality tests, were conducted before the inferential analysis. Panel data regression and correlational analysis were then conducted using SPSS. The researcher adhered to ethical standards by collecting secondary data from valid and reliable sources. The results showed that inflation rates had a significant positive effect on the profitability of the airlines. Interest rates had a positive insignificant effect on the return on assets of the airlines. Exchange rates had a significant negative effect on the profitability of the airlines. This is because the p-values of the exchange and inflation rates were less than the significance level of 0.05, while the p-value for interest rates was greater than 0.05. The study recommends that the management of the airlines should implement proactive measures and develop risk management strategies to protect the companies' profitability from potential risks. They can implement dynamic pricing algorithms and diversify revenue streams such as loyalty programs, cargo operations, and premium services to minimize reliance on the sale of tickets only. Policymakers in Kenya should implement regulations and policies that make macroeconomic factors predictable and stable. They should provide a conducive environment for stable macroeconomic factors to help the companies strategize effectively. Future studies should explore other macroeconomic factors such as money supply, Gross Domestic Product growth and taxation and profitability of the airlines; other factors that influence the profitability of the airlines to provide a more comprehensive profitability determinants model; incorporate mediating variables such as operational efficiency or management practices or moderating variables such as company size or competition or focus on international airlines operating in Kenya. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/32384 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Macroeconomic Factors and Profitability of Domestic Commercial Airlines in Kenya | |
| dc.type | Thesis |