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Revival of Nigeria, Uganda airlines ups pressure on KQ

A Kenya Airways plane at the JKIA in Nairobi. FILE PHOTO | NMG
A Kenya Airways plane at the JKIA in Nairobi. FILE PHOTO | NMG 

Nigeria has announced plans to revive its collapsed national carrier on the same day Uganda ordered two Airbus planes, stepping up pressure on Kenya Airways (KQ) #ticker:KQ whose mainstay is African routes.

Nigeria on Wednesday launched its national carrier dubbed Nigeria Air, which is set to take to the skies in December targeting the West African market.

Uganda Airlines also announced the signing of a memorandum of understanding for two A330-800neo Airbus planes for its long –haul network.

KQ is already facing strong headwinds on its African and Asian routes as the average fare has declined due to competition.

In its annual report for the year ended December 2017, the national carrier stated that more than half the revenue decline was as a result of the drop in average fares on the routes.

“This downward trend in fare is the result of increased competition and overcapacity on “Intra-Africa” and “AfricaAsia” traffic flows. The key competitors that Kenya Airways must contend with on these traffic flows include Ethiopian Airlines, RwandAir, Qatar Airways and Emirates,” said KQ in its financials.

Increased capacity by its competitors has already taken a chunk of the carrier’s revenue. The recent acquisition of planes by Uganda and Tanzania as well as the signing of a partnership between Ethiopian airlines and the Zambian government to revive the national airline for Zambia is only making the skies bumpier for the airline.

According to Ephraim Bagenda, CEO of Uganda Airlines, the agreement with Airbus demonstrates economic growth supported by a robust aviation industry.

Tanzania Airlines received its first Boeing Dreamliner about two weeks ago. The plane will poise the airline to connect Tanzania directly with other East African nations including Uganda and Burundi without having to fly through Nairobi, Addis or Kigali.

According to IATA, 2017 saw traffic for African airline grow by 7.5 per cent, yet the capacity rose at only 3.6 per cent. This, an indicator of the demand for more capacity on the various routes in the market.

KQ’s competitors have grown their capacities on these flows over the last two years while its capacity has declined marginally.

According to KQ’s annual report, Ethiopian’s capacity is up by about 20 per cent while RwandAir’s capacity is up 22 per cent. Emirates and Qatar also have grown their capacity by six per cent and 12 per cent respectively. This resulted in significant downward pressure on fares as airlines fight for traffic to fill the flood of seats in the market.

In 2016, KQ suspended flights to Abuja and Gaborone as part of changes to its route network. During the time, Gaberone was served via Johannesburg with partners.

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