(eTN) – Regular travelers on regional and international flights are used to paying for their tickets in US dollars, or at least the equivalent in local currency, according to the bank rates on the day of the transaction, but following the wild fluctuations of the Kenya shilling in recent weeks, the currency risk of fixed shilling fares for at least some airlines has become a gamble.
Kenya Airways, trendsetting once again, has announced that the fares on the domestic network between Nairobi, Mombasa, Malindi, and Kisumu will now be set in US dollars, cushioning the airline against the substantial exchange risk, which has eaten deep into the profitability of the airline that has to service loans for its fleet in US dollars, as well as pay for fuel in hard currency. October 24 has been named as the day when travelers will, therefore, have to start converting their shillings into dollars, something other sectors of the economy have introduced also of late, a result of the relentless slide of the Kenya shilling from the low 70 range to a low of 107 last week before now – as this article goes to press – trading in the low 100 range again.
Other airlines, trying to exploit a possible market reaction, have indicated they would continue to charge in Shillings but might well adjust their fares on a more regular basis, though, of course, running the risk of losing money in the exchange game for which, unlike with fuel, there are little “hedging” options available.
It is, in any case, expected that Kenya Airways would swiftly react to a shift in market share caused by their move and introduce “counter measures” to keep their own planes full and others once again to rue having gone head to head with the biggest “fish” in the aviation pond of East Africa.