KQ route expansion lifts passengers by 15.4 pc

Kenya Airways’ new local and international routes have lifted passenger numbers by 15.4 per cent, signalling the likelihood of increased profits for the national carrier.

The airline’s operational performance report for the third-quarter ended December last year indicates that passenger numbers shot up to 956,742.

Europe recorded a 14.7 per cent increase to 111,527 passengers, boosted by a new route to Rome and increased flights to London. The continent accounted for 27 per cent of their Sh85.8 billion revenue last year.

Africa routes – which bring in 49 per cent of the airline’s revenues – recorded the highest increase, posting a 26 per cent passenger growth in Kenya and a 14.1 per cent rise in other routes on the continent. The airline reported a 42 per cent growth in half-year profits, and the growth in passenger and cargo volumes is expected to boost the annual performance for the year ending March.

“With only three months to go and given that international fuel prices have eased down a bit, they are well positioned to surpass last year’s results,” said Eric Musau, an analyst with Standard Investment Bank.

The carrier is on an expansion drive that has seen it open at least five new routes per year such as Rome, increased flights to London and trips to Malindi.

The airline’s profit grew to Sh3.5 billion in the year to March compared to Sh2 billion in a similar period last year and they are now banking on the expansion plan to further grow profits.

Currently KQ flies to 56 destinations with 45 of them being in Africa and are expected to add 44 new destinations in the next five years.

Already, they have signed a deal with Embraer for supply of 10 jets over the next two years with the possibility of acquiring another 16 from the Brazilian aircraft maker. It has also signed a deal to buy nine 787-8 Dreamliner planes from Boeing to replace its ageing fleet and keep its expansion plan on track as well as three B777-300 ER.

“Kenya has a geographical advantage that makes it suitable as a hub for passengers connecting to other destinations,” said Vimal Parmar, the head of research at Kestrel Capital.

“The airline is justifiably exploiting it to start new routes and also increase capacity on existing routes”.

The Asian and Indian routes recorded the least passenger numbers in the same period. The two routes posted a 6.8 per cent improvement with 131,126 passengers in the past three months.

To remedy this, KQ in December announced plans to open six new destinations each in China and India – hoping to cut their revenue reliance on the European and African routes.

The news of the improved passenger numbers will also augur well with investors ahead of the Sh23 billion rights issue planned for later this year to fund the expansion plan which requires new aircrafts and hiring new staff.

“We expect the issue to take place before the end of the first quarter since the airline needs the money to pay for the pre-ordered airplanes,” said Mr Parmar.
pmutegi@ke.nationmedia.com