Companies

JamboJet report reveals Sh118m startup budget

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JamboJet operates flights between Mombasa, Eldoret, Nairobi and Mombasa. PHOTO | FILE

Kenya Airways has revealed it spent Sh118 million in financing the setting up of JamboJet, its low cost carrier that began flying to four local destinations on April 1.

KQ posted this amount as a net loss in its latest annual report where it also revealed that JamboJet is shouldering liabilities of Sh881 million originating from its predecessor, Flamingo Airlines, which folded in April 2004.

JamboJet chief executive Willem Hondius told the Business Daily that the airline’s performance figures would be released by its mother company Kenya Airways at a later date.

“The amount shown (Sh118 million) is the startup costs for the airline, which have been made last year before operations started,” said Mr Hondius in an e-mail response.

“I am not entitled to give any answers on the current operational results as subsidiary of KQ. KQ will report about that when time comes.”

JamboJet operates flights between Mombasa, Eldoret, Nairobi and Mombasa, with air tickets going for Sh2,950 one-way, a 65 per cent discount from the mother company’s fares.

The budget airline, which has a fleet of three planes, operates on a strategy of charging low fares but offering fewer frills.

Passengers pay for extras like food, baggage and seat choices. KQ hopes this business model will help tap the rising passenger numbers within the region and also ward off competition from budget carriers like Fly 540.

READ: How to get that elusive low airfare

JamboJet’s launch marked an about-turn by KQ, which merged its former low-priced passenger and cargo unit Flamingo Airlines with its group operations. Flamingo Airlines had been making losses over the four years of its existence.

Mr Hondius said liabilities of Sh881 million and deferred tax of Sh221 million have been carried forward from the defunct airline to JamboJet.
KQ is looking to the five-month-old budget carrier to help boost its earnings.

The airline cut its net loss in the year to March 2014 by 57 per cent to post Sh3.3 billion loss compared to Sh7.8 billion reported in March last year.

JamboJet, which is currently spending big on marketing and special offers, stands to be of even greater importance to KQ this year following the cancellation of flights to West Africa following the Ebola outbreak.

In the year ending March 2014, African operations excluding Kenya contributed 54 per cent or Sh57.2 billion of KQ’s total revenue of Sh106 billion.