Fly540 sparks price war with Kenya Airways
Fly540 has slashed its fares on the Nairobi-Mombasa route by 30 per cent, setting stage for renewed price wars as airlines seek to defend their market share.
The budget airline, on Monday said it has cut its fares to Sh6,540 from Sh9,540 for a return ticket, making it the cheapest airline on the route.
The price cut comes barely two months after Kenya Airways reduced its rates by a similar margin.
Kenya Airways charges Sh7,999 while passengers flying JetLink and Air Kenya pay Sh10,500 and Sh11,000 respectively.
The minimum rates are charged at off-peak periods and bookings must be done in advance as the airlines charge about 90 per cent more during peak times.
“After Christmas holidays, we usually have excess capacity as most travellers cut travel due to more pressing issues like school fees. Instead of reducing the frequencies on the route, we decided to lower prices so that we encourage our customers to fly,” said Nixon Ooko, the operations director at Fly540.
Airlines have cashed in on the high demand on the route during the December high season with some using low fares to woo travellers.
But with the sector recording low travel numbers in January, airlines will have to rethink their strategies to grow revenue.
Fly540’s move is set to trigger a renewed pricing war in the airline sector similar to that of mobile telephony firms.
Kenya Airways has in the past two months intensified its presence in the Mombasa-Nairobi route introducing bigger and more flights in its quest for a larger market share from the region’s busiest and most lucrative route.
In December, it increased its daily flights on the route to 14 from 10, which it said helped grow its passenger numbers by more than 30 per cent in December and is planning to introduce bigger planes such as Boeing 737-300 and Embraer 170s on the route.
“We’ve already seen stronger customer response to our more aggressive pricing strategy and continued focus on customer service excellence, resulting in record bookings over the past month,” Bram Steller, chief operating officer at Kenya Airways, said in a statement in December.
Experts say the ongoing price battle will dent earnings of airlines especially those that fly in fewer regions, adding that Kenya Airways is unlikely to feel the effect as the domestic market accounts for only four per cent of the national carrier’s revenue.
This means a drop in domestic passenger numbers is unlikely to hurt its overall earnings if other routes record growth.
In the telecoms market, where cost of voice fell by 50 per cent to Sh3 per minute, analysts and telecom executives say the rates are not sustainable for business.
Kenya Airways rivals—who in recent months have been diversifying to the eastern Africa region—generate a significant share of their revenues from the Nairobi—Mombasa route.
“We cannot afford to always respond to the competition on the market with corresponding price cuts because our aircraft are much smaller and every seat has to cover for operation and fuel costs,” said Cheryl DeSouza, AirKenya’s marketing manager.
Expansion trail
Mombasa is one of the busiest routes in the domestic market because of tourists and business travellers, and airlines have intensified their activities on this route in recent years.
Fly540, for instance, has been busy on the expansion trail as it seeks to reduce its reliance on the Mombasa route and now covers more than 12 destinations in Kenya and has moved to Bujumbura, Entebbe and Dar es Salaam.
Kenya is targeting Sh100 billion from tourism this year after surpassing the peak 2007 season in the eight months to August—raising the business outlook for airlines flying to tourist destinations like Maasai Mara, Mombasa and Malindi.
