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KQ move to drop 8 African routes makes recovery strategy tougher

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Kenya Airways plane at the Jomo Kenyatta International Airport. FILE PHOTO | NMG

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Summary

  • KQ chief executive officer Allan Kilavuka said 2020 for them is like a lost year because of anticipated low demand, which at some point is as low as 25 percent.
  • International Air Transport Association (IATA) says in a recently updated global passenger forecast that the airlines will take at least four years to recover from the effects of Covid-19 as they resume operations.

The decision by the airline last week to cut eight countries from the list of destinations where it will fly after resumption of services, is set to hurt its revenue in a year when the carrier is reeling from the effects of the Covid-19 that saw it ground all its aircraft in March.

Last week, KQ announced that it will not fly to Angola, Mali, Republic of Congo, Somali, Sudan, Djibouti, Mozambique and Malawi.

“As with other airlines, Kenya Airways #ticker:KQ has been severely impacted. Our short and medium-term projections indicate that we must inevitably reduce our operations before we begin to scale up again,” said the carrier.

“With the suppressed demand for air transport, a large part of our fleet will remain grounded. We will also operate a reduced network as we gradually resume our services, as we anticipate that it will take some time before the industry starts to rebound.”

The decision, said the airline, is an extremely difficult one in the current environment, pointing out that the action was necessary as they resumed operations gradually as determined by passenger travel demand regionally and globally.

The decision by Tanzania authorities to deny KQ permission to fly to the country, as a retaliatory move after Kenya excluded its citizens on the list of those safe to be admitted in the country, is also set to hurt the carrier.

Tanzania is one of the critical routes for Kenya Airways and the airline had planned to resume with two daily flights to Dare Salam and three weekly flights to the resort city of Zanzibar.

The carrier resumed international flights early this month and is currently flying to about 30 destinations in Africa, Europe and Middle-East.

Kenya Airways, which has mainly been making its revenue from freight after the services were grounded, says it will maintain the normal freighter services.

The carrier has forecasted passenger numbers to remain at half of its capacity for the remainder of the year after the airline resumed international flights to 30 destinations out of its 56 at pre-Covid.

In an interview with Reuters last week, KQ chief executive officer Allan Kilavuka said 2020 for them is like a lost year because of anticipated low demand, which at some point is as low as 25 percent.

International Air Transport Association (IATA) says in a recently updated global passenger forecast that the airlines will take at least four years to recover from the effects of Covid-19 as they resume operations.

“Global passenger traffic will not return to pre-COVID-19 levels until 2024, a year later than previously projected,” said IATA.

IATA says African airlines’ traffic sank 98.1 percent in June, with little changed from a 98.6 percent demand drop in May. Capacity contracted 84.5 percent, and load factor dived 62.1 percentage points to just 8.9 percent of seats filled, lowest among regions.

The association says scientific advances in fighting Covid-19 including development of a successful vaccine, could allow a faster recovery.

Major international passenger airlines resumed the Nairobi route son August 1 as Kenya opened up the airspace after the country eased containment measures brought about by Covid-19 pandemic.

The airlines, which include British Airways, KLM, Qatar Airways and Air France have resumed services between their regional hubs and Jomo Kenyatta International Airport this August.

These airlines had pulled out of Nairobi late March when Kenya closed its airspace for international passenger flights after the country reported the first case of Coronavirus.

Low passenger numbers is set to hurt the carrier’s earnings in the current financial year. The airline reported a Sh12.9 billion loss for the financial year ended December 2019 up from Sh7.7 billion in 2018 with losses attributed to increased cost of operations.

The Covid-19 pandemic has depressed the global aviation industry, with African carriers alone expected to lose $6 billion this year in revenue.

Kenya Airways cut salaries by as much as 80 percent when the crisis started and sought a government bailout to help it take care of running costs after it grounded its planes when Kenya stopped commercial passenger flights to curb the spread of the virus.

In July, the carrier said it would lay off an unspecified of number of workers, reduce its network and offload some assets due to the coronavirus crisis.