KQ now ponders change of tack to get out of the woods
Kenya Airways is courting smaller carriers on the continent, as it looks for ways of protecting its African market in the wake of increased competition from Middle Eastern airlines. Photo/FILE
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Titus Naikuni, KQ’s chief executive: I was in South Africa and we are also speaking with a number of the carriers in West Africa. We are always looking at strengthening our position in the markets in which we operate.
Kenya Airways is courting smaller carriers on the continent, as it looks for ways of protecting its African market in the wake of increased competition from Middle Eastern airlines.
There is a growing trend among African and international carriers of partnering with smaller airlines to establish mini-hubs across the region.
“Last week, I was in South Africa and we are also speaking with a number of the carriers in West Africa. We are always looking at strengthening our position in the markets in which we operate,” said Titus Naikuni, the airline’s chief executive.
The announcement by Mr Naikuni raises questions whether the carrier will eventually set up a low cost subsidiary, Jambo Jet — which is a year behind schedule — or whether it will buy into an airline in the targeted regions.
Across the region, KQ’s major competitors are eating into partnerships or acquiring stakes in other airlines they seek to use as vehicles to grow their African market. For example, earlier this year, Ethiopia Airline was chosen as the preferred strategic investor in Air Malawi.
The carrier is expected to acquire a 49 per cent stake in the airline with the rest held by the Malawian investors and the government.
Ethiopia Airlines already owns 40 per cent of Asky, a Togolese airline that the Centre for Aviation ranks as the continent’s seventh largest by seat numbers, ranking higher than both RwandAir and Precision Air. Ethiopian Airlines is also said to be considering turning Lusaka into a mini-hub, with Zambian media reporting that the airline was considering purchasing a stake in Air Zambia.
Etihad Airline has also acquired a 15 per cent stake in Air Seychelles.
Last week, Qatar Airways announced it had signed a partnership with Fly540, that will help it boost its footprint in the region and extend its reach on the continent.
ALSO READ: East African airlines expand in a bid for more airspace Given the protective nature of African governments, the partnerships are also important in helping bigger carriers like KQ and Ethiopian Airlines to get access to markets where existing bilateral air agreements limit further frequencies.
For example, in countries such as Angola, the government has limited the number of frequencies it gives out to carriers from other countries.
By acquiring a stake in an airline in a different country, airlines can increase their frequencies and get a slice of the revenue on a route, albeit indirectly.
“We consider ourself a premium carrier. We have certain internal standards, say from meals to aircraft interiors that we have undertaken to offer to our customers. So if we cannot control the standards the other airline offers, we may end up hurting the quality of our standard. That is why we tend to avoid partnerships,” said Khalid Bel Jaflah, Emirates vice president for East Africa.
Pursuing strategies that help it ring-fence the African market from predators is key to KQ, given that it derives about half of its revenues from that market.
Emirates, Turkish and Qatar Airlines generate more revenues each from African market than either Ethiopian or Kenya Airways, a reflection of the challenges that African carriers face in their quest for the control of the African skies.
“If you look at these European and Middle East carriers, most of them do long haul flights into Africa. Because of their networks and the prominence of their hubs, they attract more passengers and thus fly bigger planes into the continent, helping push up their revenues,” said Eric Musau, an analyst at Standard Investment Bank.
Another challenge facing KQ is its shareholding, which only allows it to source for funds from the open market, which places it at a weaker position compared with RwandAir, Ethiopian, Qatar, South African and Emirates, which maintain very close links with their governments.
“For these countries, airlines are a way of increasing their political and economic influence and are thus not exactly profit driven. Look at Turkish Airlines flying into Somalia or Emirates building a network to support trade in the United Arab Emirates,” said an executive at Kenya Airways.
Adding that whereas the performance of KQ is measured in terms of how much money it makes, these countries look at how their national carriers have helped booster their state image and how many international visitors they have helped fly into the country.
“The airline is not state-owned, and a cash injection might not be on the table. The government can directly help the carrier, say by negotiating against double taxation and also pushing for more bilateral agreements with foreign government as well as improving the airport, while reduces the passenger usage fee,” said Mr Musau.
