There have been a remarkable 254 global airline failures in the last decade. The airline business is indeed a tough business.
There is a lot of buzz and excitement about Kenya Airways (KQ) #ticker:KQ starting direct flights to the United States shortly.
KQ will probably operate as a combination carrier i.e. focus primarily on passengers but use the spare space in the belly of its planes to transport cargo.
This means the airfreight must be incorporated in their overall business model.
The collapse of Monarch Airlines is by far the biggest UK airline failure in history.
There have been a remarkable 254 global airline failures in the last decade. The airline business is indeed a tough business.
There is a lot of buzz and excitement about Kenya Airways (KQ) #ticker:KQ starting direct flights to the United States shortly.
The airline can realise its goals by using the strength of partners in the Sky Team Airline Alliance, which it is a member, without necessarily making a solo move across the Atlantic into New York.
KQ will probably operate as a combination carrier i.e. focus primarily on passengers but use the spare space in the belly of its planes to transport cargo.
This means the airfreight must be incorporated in their overall business model.
The choice of the aircraft type in conjunction with the massive financial resource commitments must be contributing to the challenging task of fleet management.
The Embraer 190 (E190) is great for passenger transportation but with its restricted belly-load capacity, it is not useful for the cargo business.
The E190 dominates most of KQ’s African network. Regardless of the network structure, trade imbalances often make it difficult for airlines to fill available cargo space.
For example, demand for capacity from Nairobi to New York might greatly exceed demand for the same from New York to Nairobi.
If KQ acquired rights to land in Memphis, it will have overbooked freight back to Nairobi. Memphis is the leading cargo traffic airport in the US.
On the other side, KQ manages its own freight and handling processes as part of a strategic push to grow its cargo revenue.
The biggest headache for KQ in its airfreight strategy is marketing, product management and pricing.
It has not been the first choice for Kenyans because of the perception that it is too costly.
The converse is true for Ethiopian Airlines, its continental nemesis and already flying the US route.
How will the national carrier make money on the turbulent American route? Of course without a viable airfreight strategy, it will not return any profit soon.
The marketing of our key exports by air requires predictable and sustainable supply chains.
This is the only way for KQ to steer its margins positively while keeping its revenue management in check.
Cargo capacity has all the features for revenue management techniques to be successful. There has been limited research on capacity planning models for air cargo, despite its importance in the air cargo supply chain.
Combination carrier
For KQ to succeed in their American skies drive, their think tanks must focus on operating as a combination carrier.
A great airfreight strategy will go a long way in keeping them in the air more often than on deck.
However, this will be tricky if they do not fathom that for passengers, the unit capacity is defined by a single dimension (seat) while cargo capacity has two dimensions (weight and volume).
The choice of aircraft for the US route is thus the initial key to success — it must accommodate both passengers and freight to break-even.
As a combination carrier, a solid airfreight strategy is the key to survival in KQ’s American quest.
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Bwana is International Trade, Logistics & Supply Chain Lead Consultant, Leverage Consulting [email protected]
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