Category Archives: Boeing

Kenya Direct Flights to USA? KQ Outlook

On Thursday, Kenya government officials, led by the Cabinet Secretary for Transport announced that Kenya has been granted Category 1 Status by Federal Aviation Administration(FAA) of the USA. This followed extensive renovation work at the JKIA airport in Nairobi and other aviation improvements. The elevation by one US aviation authority is a welcome step, but it is part of a process towards getting to direct flights, and there will still be more security checks, permissions, and deals to be done with airlines and airports before this comes to fruition.

The last direct flight attempt in June 2009 was halted by the US Department of Homeland Security. The Kenyan Transport minister had even traveled to the US to be on an inaugural flight only for it to be canceled at the last-minute. Delta had planned four flights a week to Nairobi, with a stop in Dakar, Senegal.

The announcement could be a boost for Kenya Airways (KQ), but the initial focus which they have maintained over the years when asked about the US,  is to pursue a code-share partnership, perhaps with Delta Airlines. Under the ongoing KQ restructuring project Operation Pride at the airline, code-shares which involve selling their tickets on partner airlines gets them revenue without having to deploy aircraft.

But once partner flights start, national prestige will force KQ to step in and do the flights themselves. They have the equipment, Boeing 787’s ‘Dreamliners’ that are perfect for direct US flights. The first Dreamliner for Kenya Airways, April 2014, flew from the Boeing factory on the West coast of the US on a non-stop a 16-hour flight to Nairobi, and expectations are to have much shorter flights from the eastern coast of the US, likely to  be Washington DC or New York. After all, rival Ethiopian Airlines  flies to five North American destinations, and there are ample numbers of Kenyans and US tourists and cargo in both directions to justify KQ flights. Perhaps once KQ gets back the Boeing 777-300’s leased out to Turkish Air.

The last direct flights to the US were on defunct Pan Am, which TV anchor Jeff Koinange who  briefly worked as a flight steward on Pan Am and he describes the flights in his autobiography “Through My African Eyes”. That flight appears to have been New York-Dakar-Monrovia-Lagos-Nairobi with a Boeing 747.

Pan Am flights to Africa were rather interesting, as this excerpt from “Life Is an Excellent Adventure: An Irreverent Personal Odyssey”, by  Jerry Funk, shows.

EDIT: In its application documents , Kenya Airways estimated that approximately 60,000 passengers will be transported within the first year of non-stop service.

Sept 8 EDIT: On September 5, 2017, The US of Department of Transportation awarded Kenya Airways PLC with a foreign air carrier permit to engage in: Scheduled and charter foreign air transportation of persons, property, and mail from any point or points behind Kenya, via any point or points in Kenya and any intermediate points, to any points or points in the United States and beyond. and The holder shall also be authorized to engage in other charter trips in foreign air transportation, subject to the terms, conditions, and limitations of the Department’s regulations governing charters. 

Boeing 787 Dreamliner Arrives at Kenya Airways

On April 5, Kenya Airways (KQ), received, The Great Rift Valley – their first Boeing 787-8 Dreamliner aircraft in Nairobi.  

KQ’s new B788 arrives


KQ Managing Director, Titus Naikuni, said their aircraft were 3-4 years behind schedule and thanked the airline staff, passengers and sales people for putting up with older aircraft in the interim. He added that plans are still on course for KQ to get more Dreamliner planes every month between June till October 2014. 

KQ Chairman, Evanson Mwaniki who was on-board the 16-hour non-stop flight from Paine Field, Washington to Nairobi, said they been assured at the highest levels of Boeing that the 787 program’s teething problems had all been sorted. He said each Dreamliner with engines cost the airline Kshs. 11 billion (~$130 million seems low), while the new Boeing 777-300’s arriving were Kshs 18 billion ($211 million)  and yet they are competing for routes with Gulf nation carriers with seemingly unlimited pockets who could order 100 aircraft when KQ orders 9.  He made three requests of the Government; to expedite bilateral air service agreements, sort out double taxation that penalize the airline and also expedite VAT refunds.


Tracking the Great Rift Valley

Transport Cabinet Secretary,Engineer Kamau said Gok and KQ had worked on new terminals (greenfield started, Terminal 4 ready in July), and new aircraft (777, 787) and invited the President to use Kenya Airways for trips and for KQ to use the President who travels a lot and get themselves on agenda for such trips. 


Also at the launch was the President of Somalia, Hassan Sheikh Mohamoud, who said terrorism was a global challenge – and that, while Shabaab was associated with Somalia where it gained a foothold in the then-lawless state, it is now losing ground in terms of financing, recruitment and training. He thanked Kenyans for their tolerance and accommodation of business  people and said Somalia was on track for a first election in 45 years in 2016 in which women would also vote. 

President Kenyatta said KQ had more of a global reach than Kenya embassies so were in essence first ambassadors for the country and that in his personal experience it had the best pilots and crew in the world. Late he noted that pilot costs are heavy, and that KQ’s labour is less productive than Ethiopian Airlines and that it was necessary for the airline to simplify operations and get better staff productivity.  He also said that Angola had agreed to open an embassy in Nairobi  – a relief to many as Kenyans applying for visas have to do so via Dar es Salaam, Tanzania. 

Engine cool-down after the extra long flight

The new aircraft is part of Project Mawingu, the airline’s massive fleet and route expansion program. It will start on the Paris route in June and in between will be used for familiarization of staff, training, and be showcased to key KQ markets.  At the launch, a General Electric representative thanked the airline for having over 100 of their engines in the fleet, while a Boeing VP said KQ had designed and selected one of the best Dreamliner interiors on offer.


KQ’s 787 Countdown

About four years behind schedule, and eight years after Kenya Airways placed an order, the airline is getting ready for delivery of its first Boeing 787 Dreamliner. KQ now has a teaser Dreamliner video on YouTube, and this image of their first aircraft on Facebook.  
KQ 787 at Everett, Washington
From the All Things 787 blog, at least three KQ Dreamliners are in the production stages with  ZA655, a Boeing 787-800, with GE GEnx-1B engines, undergoing final assembly at Everett, Washington
Two Dreamliners were expected in 2010 and four in 2011, but after production delays at Boeing, KQ is now expected to take delivery of a first 787 around April 2014.
Boeing did bring a 787 to Nairobi in 2011 during the Dreamliner World Tour, and Ethiopian Airlines who are the only African airline that currently fly the aircraft, seem to bring one to Nairobi each week.

EDIT: At #Mindspeak chat session on January 25, KQ CEO Titus Naikuni explained he delivery schedule of Boeing 787’s to Kenya Airways as:

1. April (1st week) 2014
2. June
3. July
4. August
5. September
6. October

So KQ get’s new 6 787’s in 2014, and another 3 in 2015, as they retire their Boeing 767 fleet and return all of them, but one, to their owners. They will also add a second Boeing 777-300 in June and another in August, and plan to refurbish their current fleet of 4 Boeing 777-200’s.

Kenya Airways 2011 AGM

Having not been to an AGM in 2011, I decided to take an hour-long peek at the Kenya Airways (KQ) one as a shareholder and for sentimental reasons, including the love of aviation, because a KQ AGM was the inspiration for this blog.

There’s not been much change over the years: KQ, which has over 70,000 shareholders, has been generous with SWAG to shareholders over the years and this has ensured that they always have some good attendance (they also provide free transport from town to the Bomas venue of the AGM) – however this also means that their meetings are long and drawn out, with lot’s of time wasting (Chami), and inane questions (@ChrisKaranja 90% of all questions are related to umbrellas and food)

Some notable points

Investments: Regarding their Precision Air investment, (It’s now in the middle of an IPO) a shareholder noted KQ which owns 49% of Precision, posted a loss of Kshs. 188 million for the year to March 2011 on their investment – and looking at the Precision March 2011 ones, their pre-tax Kshs. 250 million profit was halved by forex loan revaluation adjustment of Kshs. 125 million (so the current shareholders in Precision swallowed the loss before the IPO). On their dormant investments, the KQ Chairman said one of them would be revived soon (Probably Flamingo Air, or one of two cargo companies)

– The March 31 annual dividend will be paid on 16 November…

Board– Amb. Denis Afande was retiring as a director, but there were no fireworks as in previous years – as this time, the board has settled on his replacement. Amb Denis Awori, a former Kenya rugby official and ambassador to Japan, and currently Chairman of Toyota Kenya was introduced by the KQ Chairman. He spoke briefly on his passion for the airline; he studied aeronautical engineering, was a trainee at East African Airlines (EAA was the precursor to KQ) and as ambassador to Japan participated in promoting the airline as it featured heavily in tourism promotions that were run.

Rights Issue: The Chairman spoke about their need to acquire more aircraft and pay for them including 10 Embraer 190 aircraft. The airline settled with Boeing in April on the delayed 787 aircraft (some of which were to replace Boeing 767) and the first one that was expected in October 2010, will now arrive in fourth quarter of 2013 when they anticipate loads will have increased significantly.

KQ are getting permission from shareholders (and closing the books) so they could go to the Capital Markets authorities in Kenya (& Uganda & Tanzania) but they were yet to determine the size or price. One shareholder (Mr. Karanja) cautioned that it was potentially dilutive (4X), came at a bad time (share price is low – a market price of 26 compared to NAV of 50 per share) and that a convertible bond or cheap overseas loans were better options. (FC) Karanja agreed with this, adding that they had not yet set the date, price, and structure, except that the funding plan would be a mix of debt and equity and that the new shares would create capacity for when the board decided the time was right. The KQ Chairman noted that both the principal shareholders – Government of Kenya and KLM supported the increase in capital and rights issue.

Kenya Airways 2009 AGM

Kenya Airways (KQ) is the cradle of blogging for me – one of their annual general meeting’s (AGM) is the place it all started, the place where the inspiration for blogging, since then it’s been a ritual to attend because I like planes and investments similarly. This year’s AGM, held on September 25, was the first I’ve attended at Kasarani sports gymnasium; previous ones were at their Embakasi HQ, Carnivore and Bomas grounds.

what was remarkable or noteworthy?

shareholders aplenty KQ always draws in shareholders, maybe its because they are rather generous with gifts a.k.a SWAG (more on that later); but the meeting hall is full of the whole rainbow of Kenyan shareholders from business peoples, to student types (perhaps sent as proxies), but mainly older people who perhaps bought shares as far back as the IPO in 1997.

KQ courtesy shames Safaricom a few weeks ago Safaricom held a no frills AGM that did away with many of the niceties that shareholders are used to. KQ, showed they this was no a costly affair to gold; they had shuttle buses from town to ferry shareholders to and from the meeting and also gave out lunch boxes to all shareholders. The AGM did not have the usual red t-shirt that shareholders are used to, but coming on the back of Safaricom, many were satisfied.

in the meeting – CEO Titus Naikuni talked about the tough year the airline had from the credit crunch, which affected travel budgets and the price of fuel, which escalated during the year.
Fuel hedging: FD Alex Mbugua tried to explain the subject of fuel hedging, something he said even many accountants don’t understand, but which had left the company with a 5.6 billion loss. The company was able to manage an operating profit of 4 billion ($52 million) before hedging kicked in, even though the price of fuel had gone up to Kshs. 24.5 billion representing 35% of their total costs.
– For the last 5 years they have engaged in fuel hedging, this worked in their favour till 2008 – when with oil looking to zoom past $200 they locked in some contracts, only for the price to nose dice to $40 . Overall in the five years the gains remain a positive Kshs. 516 million.
In response to shareholder questions he also said
– KQ board is reviewing hedging policy, and this is through the committee of the board
– some hedging parties have been reluctant to enter into contracts with KQ of late, and insist on some cash cover
– while they could not comment on recent prices they have hedged, some to 2011, he mentioned the numbers have swung in their way as at August and they may have a write back in profits this year when they brief investors in October 2009.

Shareholder questions (with answers)
– how will they control costs? Careful choice of routes, try and expand those that work, drop those that don’t. African routes account for almost 1/2 their revenue now.
– Why did employees strike? There were conflicting unions representing employees, and during labour talks, the employees went on an illegal strike as they demanded untenable wage increments. Management was able to come to an agreement with the help of COTU and is looking to learn from mistakes it may have made to avoid this again
– Why is company’s secretary (CS) not an employee? Company did a cost benefit analysis and decided to outsource the function. The CS is still Fiona Fox and she assured shareholders that she responds to all letters written to her; most of which relate to registrar matters
– Where are reports of KQ accidents in Ivory Coast and Cameroon? CEO said investigator reports are still being done by these countries authorities, and they don’t have the former, while the latter has not been released KQ so can’t comment on it. On the Cameroon crash, KQ and insurers had made settlement with 90 of the 105 passengers, but some relatives have chosen to sue the airline or the aircraft manufacturer (i.e. Boeing)
– Why did annual report come out just 3 weeks to AGM? Management said they would try and improve and not just comply with the legal minimum for listed companies
– Why not use Precision Air aircraft (a Tanzanian airline in which KQ owns 49%) to fly to Kisumu since they have no more turbo-props for short runway? The repairs at Kisumu are short term did not warrant fleet change, and will resume flying there with their Embraer 170’s when repairs are done
– Do they plan to fly to the USA? KQ has never said they would fly to US; they have good partnerships and networks (KLM) through which they get feeds from US already, and JKIA will have to make some modifications before they can fly to US.

source: airliners.net

– What will be done about Boeing 787 which they have ordered but us yet to fly? KQ are talking to Airbus and Boeing about getting some replacement aircraft (won’t be brand new) but decision will be made in a few months
– One shareholder asked why managers /directors interest are divergent from KQ i.e. directors own few shares, while executive directors compensation is significant part of employee compensation: The Chairman said buying KQ shares was a personal decision of directors and he himself bought his shares at the time of IPO when he was not even a director of KQ. The CEO said management have not had any salary increments despite what union said during the strike.

Minor #FAIL’s: – The company registrars who had dozens of computers to register shareholder before the meeting, but whose computers were not connected. Anyone could have walked in. They also ran out of ballot papers
– The gymnasium had no water (though understandable at this time of water rationing). It was also not suited to the meeting format; the directors sat so far as to be indistinguishable except on TV screens while poor microphones/acoustics of hall meant some questions/comments were not audible
– Shareholder elections; this year, there was only one independent candidate on the ballot I guess they have realized of the futility of this exercise – and the results out today show all the board nominated director were unanimously re-elected
– CDSC (the share people): had a tent outside to register any of the 78,000 shareholders of the company; but they didn’t just ask if you had immobilized your shares, they practically demanded you pass by their tent and register to receive statements by e-mail or SMS (do away with the postal service)

Goodies: – Dividend of 1 shilling ($0.013) per share despite the loss. shareholder’s register closed day of meeting and this will be paid after October 23
– Lunch box by Sarova with drinks (yoghurt, soda & water), meats (drum stick, beef sandwich, boiled egg), fruits (banana, apple), and breads.