Transport

The Company

Kenya Airways (KQ) is the largest airline in East Africa by seat capacity, and the fourth largest in Africa behind market leaders South African Airways, Ethiopian Airlines and EgyptAir. It is currently managed through a public-private partnership with the government of Kenya holding 29.8%, KLM owning 26.7% and more than 40% traded on the major bourses of Kenya, Uganda and Tanzania.

KQ has established a dominant presence through a growing network of routes and destinations in Africa, Asia, Middle East and Europe. The airline’s core business is operation of commercial passenger flights which account for around 85% of turnover with cargo and handling making up the remainder.

Key performance drivers for the airline include the health of the global economy, which generally determines passenger traffic-flows, cargo volumes and by extension, revenue growth. Margins are largely a function of the prevailing price of oil (specifically jet fuel) which constituted 39% of operating costs in 2013. Other contributing factors include performance of the local currency and emerging market risks such as insecurity. All these were brought to bear in the financial year ended 2013, contributing to a 9.1% decline in revenues. An economic slowdown that hit the euro-zone affected performance of the top line, and adverse travel advisories following attacks from the Al Shabaab terror group in Kenya further contributed to a 3.6% decline in passenger traffic. Against this backdrop, fuel per gallon rose by 5% as the US dollar suffered a 4.2% decline against the Kenyan shilling, pushing KQ into loss-making territory in financial year 2013 reflected by a net loss of KSh7.8bn ($88.9m). In financial year 2014 KQ cut its net loss by 57% to KSh3.3bn ($37.6m) although a 7.2% growth in revenue was achieved amidst high operating costs of KSh108.7bn ($1.2bn) driven by increasing financing costs as the carrier took on additional debt for its fleet expansion plan.

Development Strategy

In 2012 Project Mawingu was launched – an ambitious 10-year strategy that aims to expand the airline’s fleet to 119 aircraft from 44 in 2013 and to grow network coverage from 58 to 115 routes with seven new routes into China, six into the Indian sub-continent and three into north and south-east Asia by 2022.

Closer to home, KQ has moved to cement its domestic and regional presence through Jambojet, a low-cost subsidiary of KQ that commenced operations in April 2014 flying to four local destinations including Mombasa, Kisumu and Eldoret. KQ has accelerated growth of its African network as it aims to become a market leader in Africa. This is being done through forming alliances with other airlines which include Etihad Airways, China Eastern, Air Burkina, Kulula.com, Air Côte d'Ivoire and direct flights to Nigeria, which commenced in 2014.

Kenya Airways received its first Boeing 787 Dreamliner, “Great Rift Valley”, the first of nine to be received from Boeing before the end of 2015 as part of its fleet expansion objective. The dreamliner comes with increased cargo space, 20% more fuel efficiency and more capacity, carrying 210-250 passengers.

Kenya Airport Authority (KAA) is playing its part through ongoing reconstruction of the arrivals terminal at Jomo Kenyatta International Airport (JKIA) that was gutted by fire in 2013. KAA is also embarking on expansion projects of the airline’s hub, JKIA, to international standards with plans to construct a second runway and a new mega terminal increasing the airport’s capacity by five-fold.

The Kenyan government continues to show its support for KQ through improving legislation as seen through amendment of the Kenya Aviation Act and the International Interests and Aircraft Equipment Bill enacted in 2013 extending protection to global financiers, sellers and leasers.

The airline continues to push the Kenyan Ministry of Transport to review bilateral air service agreements, with issues of double taxation and over-regulation being the main challenges to sustainable growth.