Africa: Infrastructure and low connectivity impede KQ’s tickets pricing
Kenya Airways blames outdated infrastructure and high operational costs for expensive ticketing compared to some of its competitors.
The position is shared by International Air Transport Association (IATA) which said that African airlines, among them KQ are 45 per cent more costly than the world average, due to poor governance and lack of cost-effective infrastructure.
The latest study by IATA also shows the region’s travel costs are $0.11 per kilometre, and some of the most expensive airlines globally within the 2,000 km range compared to Middle-East and Asia Pacific airlines.
The study on the economic value of air transport and tourism to Kenya, shows the cost competitiveness index at 6.3 out of 10, ranking the country at 93 out of 136 countries.
“Travel costs have been impeding the gross revenue growth across the markets,” IATA deputy chief economist Andrew Matters said.
However, KQ chief executive Sebastian Mikosz said the airline can’t compete with the likes of Emirates with Airbus 380 which has a three time carrier capacity in seats.
“The prices will always be different. And contrarily, we have better pricing versus offer and demand. However, we need to allow local markets to create more airlines and connectivity before we compete at an international level,” Mikosz said.
He said connectivity through Single African Air Transport Market (SAATM) is not yet in place but once countries open their skies the this will influence pricing.
Despite this, Mikosz said the company was able to attract 115,000 more passengers in the first six months of 2018, even with the cost of infrastructure in Kenya singularly being 30 per cent more than Europe.
For every, tickets out on sale for a route, the company expects a load factor of 76 per cent. KQ flies to 67 destinations.
The airline is now betting on the SAATM to grow its passenger and cargo traffic.
SAATM was established by the African Union to promote intra-regional connectivity between the capital cities of Africa by creating a single unified air transport market in Africa, and as a result create economic integration.
However, only eight countries have signed the agreement.
IATA said there is a need for legal operations, proper regulatory reforms as well as infrastructure and bilateral agreements to realise full enactment.
Protectionism has been marked as a challenge extending to countries lacking national carriers.
“I am very skeptical of SAATM. We can’t open up to the while others close the borders for us,” Mikosz added.
He said no single airline has succeeded in the African market because the market is not mature enough. ‘
“We have to go through stages and then advocate the full implementation of SAATM.” Mikosz said.
The National Assembly’s Transport Committee is currently drafting legislation on the nationalization of KQ as pat of attempts to revive the airline.
In July, MPs approved to nationalise the listed company and recommended the formation of an umbrella Aviation Holding Company to run Kenya’s aviation sector.
The committee gave the government a go-ahead to establish the holding company with four subsidiaries comprising the Kenya Airports Authority (KAA), KQ, the Jomo Kenyatta International Airport (JKIA) and a centralised Aviation Services College, which will run independently.
“It is what we need to do realise revenue but KQ will have to operate as a semi-autonomous company,” KQ chairman Micheal Joseph said.
Kenya’s market is projected to grow by 249 per cent, resulting in an additional 11.8 million passenger journeys, over the next 20 years, if key investments in infrastructure and policy reforms are prioritised
In 2018, the 3.1 million passengers arrived to Kenya from Africa, representing a 70.4 per cent of total), 585 thousand passengers arrived from Europe (13.1 per cent of the total) and 284 thousand passengers arrived from Asia-Pacific (6.4 per cent).
The study showed that the Kenyan market’s passenger facilitation (3.1) scored slightly above the African average (3) while the country ranks 12 the for visa openness.
African airlines profitability also remains elusive since 2008 to 2015, with the majority making losses over the period. It is only in 2010 that airlines made a profit.
by ELIZABETH KIVUVA