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Regional Routes

Kenya Airways dismisses talk about competition threat

Wolfgang H. Thome, eTN  Oct 04, 2010

(eTN) - Recent suggestions in sections of the media that other airlines plying domestic and regional routes were making inroads into Kenya Airways’ (KQ) market shares, were swiftly dismissed by sources in the know. Said one regular aviation expert liaising with this correspondent: "Traffic volumes are generally up, tourism is booming again, and business travel has completely revived. Kenya Airways’ results released last week at their annual general meeting are clear, they are increasing passenger numbers and keeping their market share, on some routes, in fact, doing better than before. Still, private airlines also are doing ok because of more people flying in East Africa, more visitors coming to holiday here. I think at times, some in the media are submitting to wishful thinking or are influenced by other considerations when they talk about KQ this and KQ that.

"Last month someone was suggesting to me that we were selling some of our shares in Precision Air, because we were in urgent need of cash. But this is part of our strategic partnership and outlook, that we want to spread the shares into wider ownership, and while we will re-invest the proceeds when the shares are sold, maybe some time next year when the flotation is underway, we are very liquid, even new aircraft purchases are solidly financed."

The revival of RwandAir, now operating 4 jets – 2 CRJs and 2 leased B737-500s [to be substituted next year with brand new B737-800s] – and Air Uganda turning the corner in Uganda and standing on a more solid foundation since reverting to their original start up strategy and bringing CRJ aircraft into their fleet while offloading their costly MD87s, and the regional growth of Fly540 have indeed given travelers more options to fly point to point into the region. Once again an expanding market makes it possible for more airlines to not just survive but actually make a success, as private Kenyan airlines like Jetlink and East African Safari Air Express prove.

Kenya Airways also has a near monopoly on premium passengers, as they are the only airline operating a business class cabin on all their aircraft, while most other airlines either operate all-economy flights or only offer a C-class on their larger aircraft as is the case with RwandAir’s B737, keeping this crucial revenue element firmly in the KQ camp, too. In addition, a proactive frequent flier program and incentive scheme for their faithful passengers also gives KQ some edge in the market, as does their range of destinations, effectively covering the region. The Juba route, where Jetlink enjoys about half of the market share as a result of flying twice a day between Nairobi and Juba, has already seen KQ’s share rise into the 30 percent margins, as in particular, passengers connecting via Nairobi take advantage of through ticketing, through baggage tagging and earning valuable miles, now that the Southern Sudanese capital is at last on the KQ destination list.

Said another regular aviation source from Nairobi: "Kenya is a vibrant aviation market, in many respects way ahead of our neighbours. This applies to domestic operations, safari destinations, and the international and regional traffic. The fact that KQ has recovered so well after two crisis years is a sign of their underlying strength and for having a good strategy. It also proves that a well-managed airline business in Africa does have a future, and the failures we still see are caused by political interference, grand standing, over ambition, and lack of funds when the going gets tough."

Kenya Airways dismisses talk about competition threat
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