Category Archives: Kenya Airways

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.

Kenya Airways marks 40 years with 40% fare sale

Kenya Airways (KQ) turns 40 today. It was incorporated on January 22, 1977, after the disbandment of East African Airways as a consequence of the collapse of the East African Community, and with some assets and staff of East African Airways was to be the national flag carrier of Kenya

The airline’s story can summed up in three phases: First, was a typical African state airline flying unprofitable routes to far-flung destinations, and with operational and management issues.

Then the early 1990’s saw a move to address the decline and a new board was formed, that was chaired by former Central Bank Governor Philip Ndegwa. It had a mandate to commercialize and privatize the airline. They hired Speedwing Consulting in February 1992 who appointed a new executive team that implemented an extensive restructuring involving fleet reduction, fare and route reviews, staff training and voluntary staff reduction.

This was followed in January 1996 by the sale of 26% to KLM  which was to see KQ grow as part of a global airline partnership. Kenya Airways was converted to a public company in March 1996 and its shares were listed on the Nairobi Stock Exchange in June 1996 in an over-subscribed IPO in which thousands of Kenyans bought shares. This reduced the government shareholding to 23%, and shares were later cross-listed in Uganda and Tanzania.

The third phase was the 2000’s decade when Kenya Airways embarked on a long expansion period under CEO Titus Naikuni, and there was a period where they greatly increased and modernized the fleet, and added almost a route every month, mainly to African capital cities. The expansion, however, came a time that the global and African airline space was becoming quite competitive at a time that KQ also faced new internal challenges. This was manifested in two years of successive record losses, strained network operations, and passenger relationships.
They airline turns 40 at a time when it has embarked on an extensive restructuring program called Operation Pride. KQ’s new chairman is celebrated former Safaricom CEO Michael Joseph who joined the board in September 2016, and who is leading the search for a new CEO. KQ has a leaner fleet of mainly new Boeing 787 Dreamliners and Embraer 190’s, staff and operations with a focus on partnerships and regaining profitability with the support of the Kenya Government.

For any airline, 40 years is a major milestone to reach, and even with the ongoing austerity moves, KQ is still celebrating the occasion with special fares for its passengers including:

  • 40% discount across its network for flights booked from January 22 to February 5, (the 1977 date after it commenced flights) for flights taken between January 22 to December 31, 2017.
  • $1,977 business class fares to Hong Kong, Paris, London, and Amsterdam.
  • Up to 50% off companion fares when one buys a business class ticket