NAIROBI, Friday
Kenya Airways will spend Sh299 billion ($3.6 billion) over the next five years on new planes and routes, mainly to connect travellers between Africa and Asia, its chief executive said.
Titus Naikuni said trade between Africa and China and India had soared in recent years, growing at an annual rate of about 200 per cent, creating huge opportunities in the travel market.
"We are looking at African markets. We are looking at Asia, India and we need to connect these three land masses," Naikuni said an interview.
Ranked as one of Africa’s largest airlines, the carrier that is 26 per cent held by Air France KLM, is undertaking a Sh20.7 billion ($250 million) rights issue that will go towards funding the plan.
"I’m expecting subscriptions will be 100 per cent if not more. It is going to be a success," Naikuni said, saying that Air France KLM and the Government, which holds a 23 per cent stake, had agreed to take up their rights.
"What we are looking for is Sh10.4 billion ($125 million). We have been out in the market place and a number of foreign investors are very keen.
That is what makes me very optimistic."
If the cash call is successful, Kenya Airways will get a boost to its debt equity ratio, allowing it to borrow a further $2.2 billion.
The balance of the required funds would be generated from internal resources, he said, giving the airline a chance to double its passenger fleet to 68 planes and add eight freighters. It operates a sole, leased freighter.
Extra aircraft would enable the carrier to start six new routes to China, six new routes to India, a service to Madrid as well as increase frequencies on its numerous African routes.
"We are starting Delhi in the next two months. In fact if I had aircraft I would put a double daily to Mumbai," he said. Kenya Airways’ strategy hinges on connecting Africa with the outside world through its Nairobi hub.
Naikuni said the airline would start operating daily frequencies across the continent. The airline is expecting 10 E-190 Embraer jets due for delivery next year through to 2013. It also signed a deal for the purchase of 787-8 Dreamliner planes with Boeing.
The main risk facing the firm’s plan is the expansion of Nairobi’s main airport, which although built in 1978 to handle 2.5 million passengers a year, manages five million.
"This airport must be expanded quickly ... Let’s break the ground quickly because if we continue talking, another year could go by," Naikuni said, adding that the new facility should have a capacity of 20 million passengers.
— Reuters
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