- Plans by neighbouring countries are likely to hurt Kenya Airways’ turnaround strategies.
- Kenya Airways, popularly known by the code KQ, has been enjoying a big presence in these countries capitalising on lack of national airlines.
Kenya Airways #ticker:KQ is staring at a possible loss of its regional market share following the planned revival of national carriers in Uganda, Tanzania and Zambia.
Kenya Airways, popularly known by the code KQ, has been enjoying a big presence in these countries capitalising on lack of national airlines.
Air Tanzania is welcoming a new aircraft- Bombardier Q-400, which is the third since President John Magufuli rose to power, in an effort to revive the ailing airline.
The airline has also lined up three more jet aircraft, including two Bombardier C300s and one Boeing 787-8 Dreamliner to arrive in the country before the end of this year.
Uganda is also in the process of reviving its national airline before the end of the year after the cabinet approved the plan.
This will cut the 15 years dominance that KQ has been enjoying at Entebbe which might result in revenue loss as Uganda seeks to claw back regional routes to kick-start an ambitious global outreach.
Kenya’s Transport Principal Secretary Paul Maringa, however, says the move will not affect KQ’s earnings as part of the efforts to revive the local airline are aimed at making it competitive in the regional market.
“There will be increased competition obviously, but this does not mean it will affect the operations of KQ. We are banking our strength on the services that we offer, which will keep us going even in the presence of stiff competition,” said the PS.
Prof Maringa said there is nothing wrong with competition, adding that what matters is how effective Kenya Airways will be in handling the situation.
“KQ remains dominant in most routes and we have a good partnership in Europe. We are also banking on the direct flights to the US scheduled to start in the next few months to remain the most preferred regional airline,” he said, adding that KQ good brand will give it an edge in the wake of competition.
Ethiopian Airlines, arguably Africa’s most profitable career, is also focusing on reviving some of the stalled airlines in the region. The airline has acquired a 45 per cent stake in Zambia Airways that is set to be re-launched after more than two decades.
Under the pact, the Zambian government will be the majority shareholder with a 55 per cent stake.
KQ has at least four daily flights to Dar es Salaam, five to Entebbe, four to Lusaka Zambia and at least one more other daily flight to Livingstone (Zambia).
Ethiopian Airlines is also seeking to set up hubs in southern Africa, Central Africa and the Horn that connect neighbouring countries.
According to the airline, it is working with Malawi and Zambia as southern Africa hubs. Another hub would be in central Africa, covering the Democratic Republic of Congo, Congo Brazzaville and Chad.
Former KQ chief executive officer Mbuvi Ngunze said in 2016 that their focus was on African routes, which was proving to be profitable.
“We prefer increasing frequencies in the current destination other than growth to others. Our focus is clearly Africa and we can see the strategy in Africa has started paying dividends,” said Mr Ngunze then.
The Kenya Airways’ shareholder value moved into positive territory riding on last year’s balance sheet restructuring that reduced its annual debt payment obligations, leaving room to revamp its operations.
KQ’s equity position stood at Sh417 million in the nine months between April and December 2017 compared to negative Sh45 billion in the year to March 2017, according to a financial report that was released last month.
The change in fortunes follows a complex restructuring of the business that saw Kenya Airways main creditors — 10 commercial banks and the government — convert Sh44.2 billion loans into equity to save it from total collapse.