By Jackson Okoth

The devastating effects of an ongoing recession in Europe are slowly hitting the Kenyan shoreline. On the list of casualties left in the wake of the Euro Zone debt crisis is a struggling national carrier Kenya Airways.

While the airline depends on the European market for more than one third of its revenues, depressed demand for travel from Europe has severely dented its business this year.

 “While China is growing and USA showing marked improvement, Europe is sluggish and has been stagnant for the last two years,” said Titus Naikuni, KQ Chief Executive Officer.

He made these remarks during an investor briefing that left shareholders staring at the prospect of zero dividend payout this year after the carrier suffered a Sh10.3 billion pre-tax loss.

Interestingly, it is not only KQ that has been hit by a generally depressed global aviation business. Available figures indicate that in 2012, an estimated seven airlines pulled the plug as passenger numbers fell. Airlines that have either scaled down or shut include India’s Kingfisher airlines. With the Spanish Government struggling with the Euro debt, it had no option but to leave carrier Spanair to shut down.

Minimise losses

The airline ended operations in January 2012, a flagship venture for the North Eastern region of Catalonia, which has been seeking greater independence from Madrid.” Spanair’s main base was at Barcelona, the region’s biggest city. Also falling on the way side is Austrian Airlines, which has been a testing period after posting operating losses over the past two years.

The carrier suffered uncertainty in Europe-its key markets with debt crisis in the Eurozone and increased expenses resulting from the European Union’s emissions trading scheme affecting its plans.

“We think that the ongoing instability in the global aviation industry will end and confidence resume,” said Naikuni. In the financial year ending March 31, 2013, KQ experienced a reduction in passenger traffic, which fell by 3.6 per cent to Sh9.6 billion. 

A huge chunk of this decline comprised reduced passenger traffic from Europe.  The airline had to cut down on capacity offered into Europe by 22 per cent compared to the previous period in order to minimise losses occasioned by low seat occupancy levels.

The International Air Transport Association (IATA) latest forecasts indicate that global aviation industry is expected to achieve net profits of $10.6 billion in 2013, albeit with a lot of caution on the performance of Europe. Competitors to KQ on the European route include British Airways, Swiss Airlines, KLM, Emirates Airlines, Virgin Atlantic and Qatar Airways.

KQ has cut down its staff numbers to 4,000 from 4,800 at a time when it is also recruiting new pilots to keep its expanding fleet airborne. The airline is looking at future infrastructure expansion at the Jomo Kenyatta International Airport, to drive its business. While work has been slow, construction of terminal four is expected to be complete by December 2014. Reliable information also indicates that design of the second runway at JKIA is complete and tendering process is the next stage.

Growing presence

Kenya Airways plans to launch its first services to North America, South America and Australia by 2017, making it one of the few carriers to serve every inhabited continent.

While these three continents will give Africa’s currently fifth-largest airline by seats a global presence, its future is pegged on Asia, with the carrier over the next 10 years planning to launch seven new routes into China, six in the Indian subcontinent and three across North and Southeast Asia as well as having a growing presence in Europe and the Middle East.

 Growth will be fuelled by Africa’s status as a burgeoning market, as well as reliance on partners: Kenya Airways will open routes to SkyTeam member hubs in Xiamen (Xiamen Airlines), Hanoi (Vietnam Airlines), Seoul (Korean Air), Moscow (Aeroflot) and Prague (Czech Airlines). The intercontinental focus follows Kenya’s strong emphasis on regional Africa, with the carrier aiming to serve every African nation by the end of 2013.