Shipping & Logistics

KQ eyes increase in cargo to 20pc of total business

kq

A Kenya Airways aircraft. FILE PHOTO | NMG

geraldandae

Summary

  • At the moment, cargo contributes a paltry 10 percent of the airline’s income with passengers contributing the remaining 90 percent.
  • Cargo remains the most promising business for airlines across the world following the resumption of passenger services, which have remained low.

Kenya Airways #ticker:KQ plans to enhance its cargo operations to 20 percent of its business to bolster the recovery process in the wake of diminishing demand for passenger travel.

At the moment, cargo contributes a paltry 10 percent of the airline’s income with passengers contributing the remaining 90 percent.

Cargo remains the most promising business for airlines across the world following the resumption of passenger services, which have remained low.

“About 90 percent of our business now is passenger but we now want to diversify that by moving more into cargo, my own desire is to move it from the current seven or 10 percent of the business to more than 20 percent,” said Kenya Airways chief executive officer Allan Kilavuka in an interview with CNN MarketPlace Africa.

KQ is projecting $300 million in losses this year following the adverse effects that the Covid-19 has had on its business following the grounding of passenger services in March.

The airline’s quest to haul more cargo has been curtailed by lack of high capacity long range freighters to evacuate huge volumes of freight to Europe.

The carrier has been forced to utilise some of its large capacity Boeing 787 aircraft for ferrying cargo to Europe, Asia and the Middle-East as the two freighters that KQ owns are not meant for long haul trips.

The airline is at the moment in talks with its leasers to allow them convert some of its Dreamliner aircraft into freighters.

The negotiations to have KQ allowed to remove seats in some of the Dreamliner aircraft and convert them into freighters have already begun and expected to be completed at the end of this month.

In the long run, the airline said it needs to acquire high capacity B777 for its long haul trips. KQ has argued before that the use of passenger aircraft for cargo is not economical viable.

The cost of using a passenger aircraft is higher than a freighter because of too much wasted space as the cargoes are placed on the seats. By using passenger aircraft, the airline is only able to evacuate 40 tonnes of cargo on a one leg trip

Freighters normally carry about 100 tonnes, with economies of scale making it viable for long haul cargo business.

The conversion of passenger aircraft into cargo will help the carrier to use its Boeing 787 aircraft for long haul cargo services between Africa and other continents.

KQ said the Covid-19 has affected demand for flying worldwide hence need to scale down on the number of passenger flights operated in given routes. The carrier said it is operating at 37 percent on its international route since the resumption.

“Overall demand remains very low globally and the recovery is quite slow. We are yet to see resumption of travel for the corporate segment and many of the countries especially in Africa are yet to open up their airspaces,” said the CEO in an earlier interview.

Kenya Airways resumed international flights early last month heading to about 30 destinations for the first time since the routes were suspended in March due to the coronavirus, this is down from 56 cities where it flew before the outbreak of the pandemic.

Cargo business for airlines has become so lucrative since March given the high demand for the services across the world.

For instance, the Nairobi based Astral Aviation, which ferries cargo in Africa and Europe, has seen demand grow by about 50 percent since March.

“We have seen a 50 percent growth in business since March and we have had to increase our cargo flights from nine to 14 at the moment,” said Sanjeev Gadhia, Astral chief executive officer.

Demand for cargo, especially the fresh produce, is expected to go up starting next month with the onset of peak season in Europe-Kenya’s major market for horticulture goods.

In the Headlines