Category Archives: Kenya Airways

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.

Plane Moments: Mostly KQ

 

  • Precision Air:  Kenya Airways and it’s associate company, Precison Air Services are working on a commercial alignment with respect to pricing on joint venture routes. They have applied to Kenya’s Competition Authority for an exemption as the regulator does not allow two similar airlines to have the same ticket pricing. Read more on Precision Air in which Kenya Airways has a 41% shareholding.
  • Kenya Gets Protectionist:  Kenya is limiting the issuing of new licences for global airlines seeking to exploit the strategic Nairobi hub in a protectionist move aimed at reviving the dwindling fortunes of national carrier Kenya Airways. Transport Ministry Principal Secretary Irungu Nyakera said Kenya is doing what the US and the European Union are doing, limiting the frequency of Middle East carriers because they have realised they are killing their own airlines, leading to job losses.  
  • Tanzania is revamping its national carrier by buying new planes as part of plans to boost tourism and transport sectors.  The country received delivery of two Bombardier Q400 planes in September at a cost of $62 million and has also made initial payment for the purchase of a Boeing 787 Dreamliner, which is expected to be delivered on June 18.
  • Nigeria airline takeovers: The takeover of the nation’s biggest airlines, Arik and Aero airlines by the undertaker, the Asset Management Corporation of Nigeria (AMCON) may have exposed some management lapses in the private sector.. some of Arik’s missteps to include “starting off its international services with the gas guzzling ultra long-range Airbus A340-500s literally guaranteeing losses on its relatively short-range services to London, South Africa, New York and Dubai. It also bought 10 of the relatively cost inefficient Boeing 737-700s used mostly by short-haul, low-cost airlines like Southwest Airlines. It only has four of the more efficient and versatile Boeing 737-800s suitable for high-capacity routes such as Lagos to Abuja and Lagos to Port Harcourt, as well as regional routes to West and Central Africa.”
  • RwandAir will start direct flights to India’s commercial centre Mumbai on April 3…it also plans to start flights to Gatwick, London’s second-busiest airport, and to the US this year as part of its strategy to serve more global markets.
  • The CEO of apologized for customer frustrations  over the last few months.  They have since introduced a new introduced a brand new Bombardier Q400 next generation aircraft to further enhance flight schedule integrity.
  • Etihad Airways Engineering has signed an agreement with Kenya Airways to perform mandatory checks on its six Boeing 787-8’s between February and October 2017.  Etihad Airways Engineering is the largest commercial aircraft maintenance, repair and overhaul (MRO) services provider in the Middle East.

 

Kenya Airways Restructuring Update

Yesterday Kenya Airways had a press conference with new Chairman Michael Joseph and outgoing CEO Mbuvi Ngunze. They spoke of restructuring changes happening at the company some of which included:

  • CEO search: Kenya Airways has listed between 15 and 18 candidates for CEO position, from all over the world. Shortlist will be 3-4 for final interviews (Via @wgkantai)
  • Challenges with staff. During the restructuring, some engineers have left KQ to work for Middle-East carriers. Crucially, the Chairman now seems to agree with the CEO on the need to revisit talks with the pilots union and to enhance staff productivity during the restructuring.
  • The contract with Mckinsey consulting is being wound down. It had been criticized for being very expensive. Many of the restructuring initiatives under the airline’s Operation Pride for revenue generation and cost saving were formulated by KQ staff and are being implemented by KQ staff, and hence the consultants’ time is over. Mr. Joseph said that this restructuring plan is now 55% complete.
  • KLM partnership:  The chairman defended the joint venture between KLM and KQ which some of the airline’s critics, especially its pilots, a claim was to the airline’s disadvantage. “Right now KLM is the best partner for us in terms of the route structure. The benefit is to KQ because KLM flies more routes and sells more tickets. We get revenues from the countries we don’t fly to into the joint venture. In the end, we benefit
  • The Chief Executive of KLM resigned from the KQ board and was replaced by Jos Veenstra who is a chartered accountant and is currently the VP Mergers Acquisitions and Holdings for Air France/KLM, and who has ben alternate director at KQ. It does not appear to be related with the restructuring. (via Capital FM)

NSE Shares Portfolio February 2017

Comparing performance to a year ago, this portfolio is down 50% mainly due to shares sales, while the while the NSE 20 share index is down 28% from February 2016.

The Stable

Atlas ↓
Bralirwa (Rwanda) ↓
Centum ↓
CIC Insurance ↓
Diamond Trust ↓
KCB ↓
Fahari  REIT↓
Kenya Airways ↑
NIC ↓
NSE ↓
Stanbic (Uganda) ↓
TPSEA ↓
Unga ↓

  • In: None
  • Out: Barclays, Equity, Kenol.
  • Increase: None
  • Decrease: Diamond Trust.
  • Best performer: Kenya Airways (up 12% from a year ago)
  • Worst performer(s): NIC, CIC, Diamond Trust, NSE (all down ~45% from a year ago)

Summary:

  • Another quarter when everything in the portfolio is down. Sold lots of shares after the banking law change.
  • Unexpected Events: (1) The Nairobi Securities Exchange (NSE) was assessed as the  worst- performing stock market so far in in 2017 so far according to Bloomberg – down 7% since January 1. While many believe it is due to the upcoming Kenya election, Bloomberg analysts trace the NSE portfolio decline to the devaluation of Egypt’s currency by 48% In November 2016,  which resulted in some frontier market investors blocks switching over from Nairobi to Cairo.
  • Still unable to sell portfolio shares in Rwanda (Bralirwa) and Uganda (Stanbic)  – those markets are easy to enter, but harder to exit.
  • Looking Forward to: (1) Bank results in February 2017 (2)  launch of the long-promised and always-postponed M-Akiba bond – a mobile money treasury bond.

Leaner, Fitter KQ at 40

Kenya Airways (KQ) just released their quarter three operational  results for December 31 (2016). Continuing on the restructuring changes that came after they announced their last financial results, theThe fleet and seats available for sale was 3% smaller as a result of off-loading idle aircraft from the fleet, through sale of Boeing 777s, and leases and returns of others.

Despite the smaller fleet, KQ flew 1.1 million passengers in the quarter, almost 5% more than last year with a cabin factor of 72% up from 68%. The passengers were on routes in Europe (102,749), Middle East & Far East (138,700), Africa (530,842) and within Kenya (347,136)

KQ increased the number of flights in Africa, while reducing capacity on others as a result of  using Boeing 787s and Boeing 737s on the Middle East, China and India routes that were previously served with Boeing 777s. They added routes to Cape Town, as well as others on the Nairobi-Entebbe-Bangui and Nairobi-Doula- Bangui but suspended flights to Gaborone and Abuja.

KQ’s financial year-end is on March 31, 2017 and they are currently celebrating their 40th anniversary with a 40% fare sale on all routes, and with special fares in business class, marking their beginning in the year 1977. They also just announced an interline cargo agreement with Qantas through which they target to fly 30 tonnes of flowers per month to Australia, as they explore shipping even more flowers to China and the Far East

Last week also saw Kenya Airways largest shareholder, the Government of Kenya, flex its muscle by canceling a third Emirates daily flight into Nairobi that was to begin in June 2017. Emirates currently flies Boeing 777s twice daily between Nairobi and Dubai.