KQ turns to Boeing rival as manufacturer fails to deliver on time

The delay in getting the latest Boeing 787 Dreamliner aeroplane has forced Kenya Airways to enter into negotiation with a rival manufacturer, Airbus, for the delivery of nine planes.

The Boeing delay, occasioned by technical and manufacturing hitches, has led to rescheduling of the test flight for what is said in the aviation industry to be the Holy Grail to reducing the rising cost of flying a plane and increase passenger carriage.

“The delay in getting the Boeing 787 out into the market is affecting our plans. We are talking to Airbus as a safeguard measure to ensure our expansion plan is not disrupted by the continued delay”, said Mr Titus Naikuni, the chief executive officer of Kenya Airways.

The latest schedule shows that at the earliest, the plane billed the largest and the first to use fibre carbon instead of metal body will be available towards the end of the year.

Boeing has a huge backlog of orders, especially from some of the largest carriers who have threatened to cancel their orders or even haul the plane- maker to court.

Kenya Airways, which has been on an expansion spree, had planned to add nine Boeing wide -body carriers to its fleet to meet the needs on its newer routes.

With an increased focus on the African market which is seen as the next frontier for aviation growth and to ward off expected competition from other regional carriers such as South African and Ethiopian Airline, KQ plan to get Airbus fleet is meant to position it as the continental carrier of preference. Already, the local carrier plans to fly to Angola, Zambia and Zimbabwe before the end of the year.

But this may be affected by the fact that the company has fewer planes which are currently serving existing routes. The carrier is estimated to control 67 per cent of the Africa route network which accounts for over half of its annual revenue.

In the year ended, the carrier’s turnover rose by 18.8 per cent to Sh71 billion on the back of passenger numbers. However, the company recorded 186 per cent pre-tax losses of Sh5.7 billion despite operating profit of Sh4.04 billion. The slump in profit was attributed to increase in fuel cost by 37 per cent pushing the overall fuel bill to Sh26 billion.

In addition, weakening of the shilling against major currency especially the greenback contributed to the rising cost of operation. The operation of the current fleets which are much older has had an overall effect on the volume of fuel consumed.

The drive to acquire new planes is also meant to enhance efficiency in fuel usage. Indeed, the Boeing 787 Dreamliner is billed to consume 20 per cent less fuel than the current 787 plane.

“We intend to grow the company top and bottom line through increased revenue generation by entering new routes or increasing flights to existing routes”, said Naikuni on the sideline of the airline’s annual general meeting.

Addressing the shareholders, the airline’s chairman, Mr Evanson Mwaniki, predicted a better time ahead as the global economy shows green shoots.

The economic crunch has added a headache to the airline management as passenger numbers have fallen. The operation of the airline is tied closely to the country’s tourism industry and the drop in number of visitors has had a direct impact on Kenya airways business.

“We suffered tactical cutbacks in capacity as a consequence of a slump in demand due to global economic melt down”, Mr Mwaniki said.

But the positive growth of the Africa route, especially West Africa which grew by 15.7 per cent, presents a prospective growth route for the carrier.

Kenya Airways intends to ride on the back of the government plans to enter into Bilateral Air Services Agreements (BASAs) with other African government which will provide landing rights hence business opportunity.

During the AGM, the shareholders approved the payment of the proposed Sh1 dividend per share which will be paid on October 31. In addition, the shareholders approved the proposal to have the annual results published in the media and sent to shareholders through electronic means.

This drive, which is gaining acceptance across the local corporate scene, is seen as a way of cutting down on the cost associated with printing voluminous and glossy financial statements.

Kenya Airways joins Safaricom and Access Kenya in tapping the electronic media as a means of communication with its verse number of shareholders which stands at 80,000.