Corporate News
KQ to benefit as Virgin Atlantic exits Kenya route
Virgin Atlantic staff during a past event. The airline, which began Kenya operations in 2007, has announced that it will quit the market in September. Photo/File
Posted Wednesday, May 16 2012 at 20:47
Sir Richard Branson’s Virgin Atlantic has quit the Kenyan market on low passenger numbers amid rising operation costs — handing Kenya Airways a major boost for control of London-Nairobi route.
The airline on Wednesday announced that its last flight on the route, which accounts for about 15 per cent of Kenya Airways’ revenues — will be on September 24 ending Virgin Atlantic’s operations in Kenya that started with pomp in 2007.
Its entry into the Kenyan market upped competition on the London-Nairobi route, which saw travellers enjoy cheaper fares in a route that has giants like British Airways and Emirates and which is the most competitive.
The 32 employees in Virgin’s Nairobi office ware caught unawares by the mid-morning announcement and the carrier said its working on redundancy package that will be made public in coming weeks.
“During the past five years a combination of record fuel prices, higher and higher taxes imposed by the UK Government and a poorly timed slot not providing connections from London, have made it uneconomical to fly from Nairobi,” said Sir Branson in statement from London.
“For the past five years our team in Nairobi have worked incredibly hard and we hope to return should the economic situation change.”
Besides Nairobi, its African operations include Lagos, Accra and Johannesburg and the exit comes at time when the carrier has just returned from losses.
Besides facing stiff competition, Virgin faced reduced passenger numbers as the on-going eurozone crisis has reduced travel in the continent—which saw Kenya Airways announce a drop in passenger traffic on the on the continent to 113,184 passengers in the three months to March compared with 118,035 in a similar quarter last year.
The rising cost of fuel coupled and high taxes for EU carries has increased the cost of running airlines.
The industry lobby the International Air Transport Association downgraded the aviation sector’s 2012 outlook last week citing high cost of operation.
The lobby cut the industry’s profitability projection by $500 million to $3 billion saying high crude oil prices averaging $115 a barrel – more than $10 above its initial forecast – cast a dark shadow on the profitability path.
“This year continues to be challenging for airlines and the outlook is fragile,” Tony Tyler, the lobby’s chief executive said in a statement issued last month.
Kenya Airways has already issued a profit warning for the year ended March, which means it expect a maximum of Sh2.65 billion in net profit, which would be a drop from the previous Sh3.5 billion.
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