Tuesday, January 22, 2013

KQs budget airline yet to take to the sky

PHOTO | FILE Kenya Airways budget carrier Jambojet is yet to take to the skies even after getting the greenlight from the authorities.

PHOTO | FILE Kenya Airways budget carrier Jambojet is yet to take to the skies even after getting the greenlight from the authorities.  NATION MEDIA GROUP

By JOSHUA MASINDE jmasinde@ke.nationmedia.com

Plans by the national carrier to launch a low cost airline continue to remain in doubt nearly four months after receiving a licence to operate 22 routes in East Africa.

Kenya Airways (KQ) was to launch JamboJet, a budget carrier before the end of last year to compete other low cost airlines in what would have given rise to fierce contest for the region’s skies.

Speaking to Smart Company, the airline’s communications manager Chris Karanja said a team that had been constituted to come up with an operational plan for the carrier was still at work and plans are at an advanced stage.

“We should be able to know the operations and details before the first quarter this year,” said Mr Karanja.

The team is expected to, among other things, come up with how routing should be structured, the aircraft to be used and the pricing.

A senior official at the airline had earlier said it was difficult to know when operations of the low cost carrier would start, pending the outcome of an investor briefing sometime before June this year, but insisted that they were still “working on it.”

Through a Gazette notice dated October 12 last year, the Kenya Civil Aviation Authority (KCAA) issued KQ’s JamboJet with a licence to fly to and from Wajir, Eldoret, Kisumu, Mombasa, Lamu and Malindi using a Boeing B737 aircraft on the domestic front.

It was also given the nod to fly to Juba (South Sudan), Goma and Kisangani (Democratic Republic of Congo), Moroni and Dzaoudzi (Comoros Island), Dar-es-salaam, Mwanza and Kilimanjaro in Tanzania, Entebbe (Uganda), Addis Ababa (Ethiopia), Zanzibar, Pemba, Antananarivo (Madagascar), Bujumbura (Burundi), Kigali (Rwanda), and Hargeisa (Somaliland).

The aviation’s regulator had also allowed Fly540, another budget carrier to introduce an Airbus A319, a bigger plane on domestic and international routes.

This follows FastJet’s entry into Africa’s aviation industry, operating licences by Fly540. FastJet began operations at the end of last year from its Dar-es-Salaam, Tanzania and indicated it would establish another base in Nairobi.

Another budget carrier, Jetlink, flew into turbulence in November last year and grounded its services after running short of funds.

The airline attributed its woes the failure to access about Sh170 million ($2 million) of its revenue from ticket sales holed in bank accounts in South Sudan.

Competition in the aviation sector at the regional and global level has continued to see many airlines change strategies in pricing, partnerships, halting operations on unprofitable routes and staff layoffs to remain in the skies.

Recently, Kenya Airways cut its capacity on Mumbai route citing a seasonal decline in bookings. This also followed a decision last year to reduce capacity on Rome and London routes.

Analysts say the airline’s challenges including the litigation pitting it against sacked employees and the difficult financial position after it landed into the loss territory last year could have had a role on delaying the roll-out of JamboJet.

Rising staff costs

“They have had a lot to deal with in terms of litigation and financial position,” Standard Investment Bank market analyst Eric Musau said.

Last year, KQ sacked over 500 workers in a move aimed at saving rising staff costs, but its decision was later overturned by the High Court which reinstated it.

The airline had banked on using the Sh4.7 billion loss it recorded in the first half of the financial year that ended September 2012 to argue out its case in the retrenchment exercise. In the previous half year ending September 2011, the airline recorded a Sh2 billion profit after-tax.

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