Fly 540 eyes new routes in East African Safari buyout

Regional budget carrier Fly 540 is set to acquire rivals airline East African Safari Air Express in a deal that sets the stage for a fresh battle for control of the East African routes.

The acquisition of the troubled East African Safari will give Fly 540 access to its planes, staff and flight route licences at a time when the industry is faced with a shortage.

Details of the deal including the purchase price and stakes to be bought remained sketchy with Fly 540 promising to release them once the transaction has been sealed.

The operations director Nixon Ooko said the move was aimed at sharpening the airline’s competitive edge.

The deal will give the carrier access to new routes such as Juba and Somali’s Hargesia and room to add frequencies on routes such as Kisumu, Mombasa and Malindi at a time when Fly540 is planning to buy new planes to serve the routes.

It will add competitive pressures on the routes at a time when the operators led by Kenya Airways, Jetlink and Airkenya have intensified their activities in the locals routes as they cut fares in an attempt to grow and defend their market shares.

East African Safari Air Express, which is owned by businessman Adan Ogden, has grounded its operations since last month due to disputes over plane leases and staff flights.

“There is a serious discussion between the two airlines but it is too early to comment on the deal,” said Mr Ooko, adding that the purchase of East African Safari’s interest will give it a bigger foothold in the increasingly competitive route.

On Monday, East African Safari Air Express issued contract termination notices to its staff to pave way for the entry of Fly 540, which confirmed it might hire some critical staff such cabin crews, pilots and flight engineers.

Players in the sectors reckon that the firm went for the deal with the intention of acquiring the route licences for Juba and Somali —which are emerging as the profit drivers for the regional carriers in the face of price wars on the local routes.

The twin routes have in recent months experienced increased traffic mainly due to the increased flow of donors and businessmen, especially in Juba which is shaping up to be the next growth spot in the Eastern Africa region.

Locally, airfares on the high volume routes of Kisumu and Mombasa have fallen significantly as the operators led by Kenya Airways race to grab market share from its smaller rivals, who in recent months have boosted their presence in the local market with more frequent flights and new routes.

For instance, flights on the Mombasa—Nairobi route have fallen to a low of Sh7, 999 compared to a high of Sh14, 000 in September.

Just like in the telecom’s market, the carriers says the ongoing price war could hurt their revenues, especially those of KQ’s rivals who argue that the national carrier operates in larger markets and can subsidise its Mombasa operations.

In the Telecoms market, where cost of voice fell by 50 per cent to Sh3 per minute, analysts and telecom executives say that the rates are not sustainable for business.

Kenya Airways rivals—who in recent months have been diversifying to the Eastern Africa region—generate a significant share of their revenues from the Nairobi—Mombasa route.

Mombasa is one of the busiest routes in the domestic market because of tourists and business travellers, and airlines have intensified their activities on this route in recent years.

But with ongoing price wars, the smaller operators are looking at the regional routes to countries such as Sudan, Tanzania and Somali—a move that egged Fly540 to snap up EASA with eye cast on the two regional licenses.

Mr Ooko said that Fly540 is buying new planes next year which it hopes to deploy in some of the routes they are acquiring from EASA with the regional market its priority as its seeks to shield itself intense competition from Kenya Airways, Jetlink, Air Uganda, Rwandair and Precision Air of Tanzania.

Last month, EASA suspended its entire operations sending all its workers on leave on claims that it faced operational challenges leading to the suspension of all flights.

“We regret to advice you that flights to all destinations have been suspended temporarily due to operational reasons,” the notice read.

The airline lost two newly acquired aircraft following a disagreement with the South Africa based company it had acquired the equipment from, crippling its operations and prompting it to lease its two remaining airlines to Fly 540

EASA has been operational since 1998 and mainly operates scheduled flights to Kisumu, Lokichogio, Malindi, Mombasa, Hargesia and Juba.

It is one of the small players in Kenya’s fast growing aviation market and was eyeing to acquire new equipment to support its roll out plan in the region.