Thursday, December 15, 2011

Kenya Airways targets China, India with Boeing planes for growth

Kenya Airways is eyeing routes in India and China to tap the growing trade between Asia and Africa.

The national carrier is planning to open six new destinations in each of the twin countries helped by the new planes its set to acquire in coming months to cut its heavy reliance on the European and African routes.

Presently, the national carrier operates single daily flights to China and India, although expansion to new routes has been curtailed by lack of planes.

“Our own strategy is looking at expanding into China and India specifically. They are important in driving our future,” said Mr Titus Naikuni, KQ’s chief executive.

Now, KQ is targeting to boost its presence in the Asian market helped by the plan to double its fleet from the current 33 to 62 by 2016—which will allow it to connect the bulk of travellers from African cities to Asia through its Nairobi hub.

The twin countries are emerging as engines of the global economic growth as they grow faster than the US and European economies—which are slowing down due the ongoing economic turmoil.

This growth has helped Chinese and Indian businesses to spread their reach in search of raw materials and markets as well boost leisure travel among the growing middle class families in the twin countries.

As a result, airlines are racing to connect their hubs to Asia to tap the growing travel from Asia to Europe, America and Africa.

Presently, KQ draws 49 per cent of its Sh85.8 billion revenue annually from its Africa routes, 27 per cent (Europe), 10 per cent (Middle East), nine per cent (Asia) and five per cent from its domestic routes.

Its target is to have the Asian routes contribute double digit share of its revenues, thanks to increased trade volumes between the continent and Africa.

India is the second largest exporter of goods to Kenya behind United Arab Emirates. China is third, having exported goods worth Sh87.2 billion in the first eight months of the year while India brought in products worth Sh97.6 billion in the same period.

Kenya Airways is pursuing the strategy of connecting more African cities to Nairobi using short distance planes like Embraer and putting them in larger Boeing planes to Europe and Asia.

The airline opens an average of at least five new routes every year and currently flies to 56 destinations with 45 of them in Africa. To this end it inked a deal with Embraer for supply of 10 jets over the next two years with the possibility of acquiring another 16 from the Brazilian aircraft maker.

It has also signed a deal to buy nine 787-8 Dreamliner planes from Boeing to replace its ageing fleet and keep its expansion plan on track as well as three B777-300 ER.

KQ is expecting to start adding the larger Boeing jets to its fleet from next year and fleet expansion plan will see the national carrier raise more debt from banks and capital from shareholders. The carrier is expecting to raise Sh23 billion from a rights issue in coming

“The first pre-delivery payment should have gone last month and that is why we are coming to the market now,” said Alex Mbugua, KQ’s finance director.

Its net profit grew to Sh3.5 billion in the year to March, compared to Sh2 billion in a similar period last year, while its share price shed 55 per cent in the past six months on the bearish run at the Nairobi Securities Exchange (NSE).

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