Tuesday, March 17, 2015 Middle East carriers push KQ into turbulent future

 The Kenya Airways Dreamliner B787 on touchdown at the Jomo Kenyatta International Airport during the official reception in Nairobi on April 5, 2014. PHOTO | FILE  

BY EDWIN OKOTH
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In Summary

• Dubai’s Emirates has also brought the battle to the doorstep of the troubled Kenya Airways  when it announced plans to connect more people with Kenya’s capital, Nairobi, by switching from the current Airbus A330-200 aircraft used in one of the two daily flights to a larger Boeing 777-300 ER starting May 1.
• Ruto called on Kenyans to support KQ and appealed to all the local carriers to price their tickets  competitively to attract and win the loyalty of Kenyan travellers.
• Western airlines have long complained about competition from the three Gulf carriers, which are fast turning their home airports into major hubs for transcontinental routes.

Last week, Dubai-based carrier, flydubai said it would increase its flights in Africa to 78 per week.

The airline, which doubled its Africa routes last year, will have 12 touch points in East and North Africa. The latest destinations are Alexandria, Bujumbura, Juba and Zanzibar. This has seen its passenger numbers in Africa shoot up by 14 per cent.

Flydubai chairman His Highness Sheikh Ahmed Bin Saeed Al Maktoum said the airline’s strategy this year is to increase flights, especially in the underserved routes in Africa.

Dubai’s Emirates has also brought the battle to the doorstep of the troubled Kenya Airways when it announced plans to connect more people with Kenya’s capital, Nairobi, by switching from the current Airbus A330-200 aircraft used in one of the two daily flights to a larger Boeing 777-300 ER starting May 1.

Abu Dhabi’s Etihad Airways and Qatar Airways have also been increasing their touch points in Africa.

The latest plan by the giant Gulf carriers means a fresh headache for Kenya Airways.

“The coming of the Middle East carriers to fly destinations in Africa is a real threat for KQ’s long-haul destinations,” said Standard Investment Bank senior research analyst, Mr Eric Musau.

Kenya Airways, Mr Musau added, should now consider scaling down its expansion involving purchases of large aircraft for long-haul travels until the current assets are fully used.

BASELESS ALLEGATIONS

Considering that in 2014 Africa accounted for 54 per cent of the airline’s income, the new threat in this airspace is likely to worsen the situation for the loss-making carrier. Kenya Airways suffered Sh10.451 billion loss for the half year ending September, 2014.  It doesn’t help KQ that the new competitors are said to be receiving huge subsidies from their governments.

Three top US airlines accused Dubai’s Emirates, Abu Dhabi’s Etihad Airways and Qatar Airways two weeks ago of receiving subsidies from their governments amounting to $42 billion (Sh3.9 trillion).

In a 55-page report, the US airlines and labour groups said the three Gulf carriers had benefited unfairly from huge interest-free loans, subsidised airport charges, government protection on fuel losses and below-market labour costs considered unfair subsidies by the World Trade Organisation.

In the report, American Airlines, Delta Airlines and United Airlines, along with US pilot and labour groups, urged Washington to raise the issue with the UAE and Qatar.

The accusations have, however, been denied.  “These accusations are false and unacceptable. They are baseless,” UAE economy Minister Sultan al-Mansouri was quoted as saying by the Emarat Al-Youm newspaper.

Mr Mansouri said the UAE was “ready to discuss such claims, on condition of receiving reports that would prove that UAE carriers received government support.”

Western airlines have long complained about competition from the three Gulf carriers, which are fast turning their home airports into major hubs for transcontinental routes.

The waning fortunes of Kenya Airways could have prompted the government to move in to keep it afloat.

Early last month, an inaugural aviation workshop held at the KQ Pride Centre to supposedly deliberate on the way forward for the local industry turned out to be a strategy to whip up all government officers to fly KQ.

The meeting presided over by Deputy President William Ruto discussed ways of increasing the airline’s passenger numbers. The forum brought together several top government officials including a host of Cabinet secretaries, permanent secretaries, governors and senior aviation stakeholders.

Ruto called on Kenyans to support KQ and appealed to all the local carriers to price their tickets  competitively to attract and win the loyalty of Kenyan travellers.

CLEARANCE DELAYS

“As we promote and pledge to support Kenyan carriers such as Kenya Airways, we must as a government make it clear that we will not tolerate unfair competition. Kenyan carriers must deliver high quality services and attractive pricing propositions,” said Mr Ruto.

Similar sentiments were expressed by Transport Cabinet secretary Michael Kamau, who warned that the carrier could plunge into a crisis should Kenyans fail to support it.

“If you don’t support our national carrier, we will end up carrying it instead. Our aviation industry is at crossroads and we have to determine the direction we will take going forward,” Mr Kamau said.

Government efforts to lift KQ out of trouble are not new. Qatar Airways’ application for licence to be the third foreign airline to fly to Mombasa from August 2013 failed over what was said to be traffic right issues.

In 2012, the Doha-based airline’s application to fly to Kilimanjaro via Nairobi was not permitted by Kenyan authorities.