Category Archives: Kenya Airways

Oman Air launches Nairobi flights

Product launches seem to follow an established template: bright flashy lights, cakes, and ribbons, and occasionally a tame wild animal, concluded by a rehashed speech from a government functionary. But no wildlife was present as Oman Air officially launched their four times a week flight to Nairobi at the Kempinski Villa Rosa Hotel on 29th March 2017. The inaugural flight to Nairobi had arrived the previous day and it was received by local Kenya airport and Government authorities.

Importantly, however, was the interest generated of Oman as a destination and indeed a hub for travelers to the Middle East and beyond. The airline’s Deputy CEO and VP –Commercial, Abdulrahman Al Busaidy proved not only an eloquent spokesman for his company but a worthy ambassador of The Sultanate of Oman. The interest of those present at the launch was piqued as few had ever thought of Oman as a holiday destination let alone a hub. Most travelers from Kenya have traditionally chosen the Arab carriers that utilize Dubai (Emirates), Doha (Qatar), Abu Dhabi (Etihad) as well as Sharjah (Air Arabia) which all market themselves’ as glitzy shopping and commercial destinations.

Oman Air doesn’t pretend to be a Gulf Major carrier. Currently Emirates, Etihad and Qatar Airways are the undisputed ME3 giants who are now subject to what has been perceived by many to be protectionist measures from the USA and the UK in the guise of the ‘laptop ban’. Al Busaidy attributes such measures to the incapability of carriers from those countries to compete on services available at their fantastic airports and modern fleet and services. While no US carrier serves the Middle East, the gulf carriers operate multiple flights to any of the major hubs in the Middle East.

Oman Air is leveraging the long historical ties between Kenya and Oman which date back to the days when the Portuguese ruled much of the East Coast of Africa. Indeed the Sultan of Oman’s army flushed out the Portuguese from Fort Jesus in the 17th Century and the cultural exchanges and inter-marriage with the local coastal people gave rise to Africa’s most widely spoken language, Kiswahili.

Currently, the airline flies to Dar es Salaam and Zanzibar with Nairobi being the 55th destination of the airline’s growing route development. With a popular in-flight entertainment and free Wi-Fi service on most of its aircraft, Oman Air now has a fleet of 47 aircraft with a mix of Embraer Regional Jets (ERJ) for local and regional flights, Boeing 737s for short haul routes and Airbus A330’s and now the Boeing 787 Dreamliners for the long haul flights.

Indeed two of the Dreamliners were leased from Kenya’s national carrier Kenya Airways (KQ’s) as part of fleet rationalization of KQ’s ongoing Operation Pride restructuring. Both airlines are expected to conclude a code-share agreement by mid-April 2017. Oman Air has also chosen not to align itself with any of the major airline alliances such as Sky Team, Star Alliance or One World but instead code shares flights with Emirates, Ethiopian, Garuda Indonesia, KLM, Royal Jordanian, Saudia, Sri Lankan Airlines, Thai Airways and Turkish Airlines.

Muscat as a base for Oman Air provides the entry point to this traditional conservative Sultanate which has a rich history in preserving its culture (Islamic architecture, all-white buildings, Dhow making, Painting shows, the Muscat Festival and the Khareef Festival held in Salalah in July and August annually) and environment punctuated with over a 100km coastline.

Nairobi will serve as the entry point to popular tourist destinations at the Kenyan Coast and the wildlife marvels of the national parks in the Mara, Tsavo, and Amboseli. Tourism between Kenya and Oman is expected to grow as the airline also envisages Mombasa as a future destination. Coupled with a fairly liberal visa regime (Note that Dubai visa holders get automatic entry into Oman), Oman Air is hoping to prise away traffic from the other carriers especially to the big hubs of the Middle East, India, and China. With introductory fares of $350 to Muscat and $485 to Guangzhou return, this could prove to make for interesting times for travelers to and from Nairobi.

Oman Air indeed epitomizes Oman as a country, its aspirations, culture, history and modernity and its approach to tying itself to both its past and the future as it opens up new destinations. The Nairobi route will be operated by a Boeing 737-800 and the airline’s growth and development strategy plans for 70 aircraft (currently they ar e47) and 75 destinations by the year 2020. The four times a week flight (WY722) )leaves Nairobi at 00:45 (on Tuesday, Wednesday, Friday, and Sunday) and operates non-stop and is designed for an early morning arrival in Muscat that enables connections to other 50 destinations.

Oman’s currency is the Rial and OMR 1 = ~$ 2.6, and OMR 1 is ~Kshs 267.

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.