How to stay profitable on a low-cost model

Where money is concerned, there are few industries that are riskier than the airline business.

Just as Virgin Atlantic founder Richard Branson famously quipped: “If you want to be a millionaire, start with a billion dollars and launch a new airline.”

Jambojet Managing Director Karanja Ndegwa knows a thing or two about remaining profitable on a low-cost model, having been there since the inception of the budget airline.

He speaks on what makes Jambojet tick, the true meaning of the open-door policy, daring to be different and Nuts! - the book on Southwest Airlines’ crazy recipe for business and personal success that inspires him. The US based Southwest Airlines is the world’s largest low-cost carrier.

Know your market

Jambojet started flying on April 1, 2014. Their vision was to make flying affordable, achieve job security for employees and make a profit. To achieve this, their strategy involved ensuring quality service at the lowest fares and the safety of passengers on board.

“We started by flying three routes; Mombasa, Kisumu and Eldoret. Most of the people we flew with in the morning were on board in the evening. In no time, we had increased passenger numbers from 700 to 1,100 on the Mombasa route,” recalls Ndegwa.

“When we started flying to Diani, we had 53,000 passengers per year. The figure more than doubled to 120,000 passengers in two years.”

Short trips

The company has perfected the regimen of flying short trips – lots of them and often.

“We ensure that an aircraft is always in the air. Don’t fly two hours, fly 10 a day if you can, because aeroplanes generate revenue only when in the air.

“The ground crew are not idle, thus maximising the productivity of our employees. And be reliable and safe.”

Safety, Ndegwa says, is non-negotiable. “We’d rather disappoint you than compromise your safety. We are IATA Operational Safety Audit (IOSA) certified and are audited every two years.

Recently, the airline launched cargo flights to Goma, DRC.

“We noticed that no one was flying direct between Nairobi and Goma, yet we have so much trade between the two. Meat, vegetables and other consumer products come in through the port, and most trucks go to Kisangani and Goma in DRC.

“If you wanted to travel from Kenya from Goma, one had to travel two-and-a-half hours to Kinshasa, then three-and-a-half to Kenya, or go through Addis Ababa, not counting the ground time. You end up taking a 12-hour flight that would have taken two hours, and all that at more than double the price.”

“Jambojet saw the need in this overpriced and underserved market and made it cheaper and faster especially for the business community, who need to transport cargo both ways, all the while de-risking the business.

“By now, we ought to be flying four frequencies at 60 per cent load, but were derailed by the pandemic,” he said.

With DRC getting into the East African Community, movement will become much easier with things like visa costs being removed.

Be reliable

The conventional wisdom of demand and supply stipulates that when flights are full, prices should go up.

“Instead of raising fares, we increase the number of flights and expand the market in the process,” says Ndegwa.

It is the notion that they are not competing with other airlines but with ground transportation that has them keeping their prices at rock bottom.

Don’t diversify

The airline is able to keep prices rock bottom by flying the same fleet, the De Havilland Canada Dash 8-Q400 aircraft. Q stands for quiet so passengers can enjoy a quieter cabin thanks to the Q400’s active noise and vibration suppression system.

“Flying one type of aircraft means that the training for the pilots, engineers, and flight attendants is simplified, thus not spending on different kinds of things like simulators for training the pilots. The investments are lower because the tools used are few,” Ndegwa explains.

That way, all Jambojet pilots are qualified to fly, flight attendants are qualified to serve and maintenance people are qualified to work, making it easier to substitute aircraft, reschedule flight crews or transfer mechanics quickly and efficiently while maintaining the highest safety standards.

Automate

“About 67 per cent of our passengers book online and 25 per cent check in online. This is efficient as it reduces the number and cost of brick and mortar offices,” says Ndegwa on one way Jambojet reduces costs.

“Our systems are a low-cost model, which is point-to-point whereby we use the same system for the back end and front end. At the end of each flight, I can tell how much we made, without having to involve an accountant to balance the books.”

The airline also serves no meals. With flights averaging 60 minutes, there is little time for meal service, which would ultimately increase the ticket cost. Instead, they have peanuts and other snacks for sale on board.

If the passenger numbers are anything to go by, it is that the flyers are willing to trade some of the amenities for low fares.

Give value to the customer

“The call centres are always available and we keep educating through our online platform,” Ndegwa says.

That education is a strategy that puts them over and above their competitors during the pandemic.

“I was appointed MD on April 1, 2020, and the country went into lockdown barely a week later. With nothing to do, we started chartered flights, but most importantly, we educated people about Jambojet,” he says.

Pilots, engineers and cabin crew would share a day in their work lives. “We didn’t know it then, but we were preparing for the lifting of the lockdown.”

The MD says that the moment the country was reopened, they were ready to fly the following day.

“Other airlines took a week or so just to realign. By the third day, we were flying four frequencies. That day of reopening helped us recognise who the king is.

“Being in finance for 21 years, first in the banking sector then at Kenya Airways – an airline that offers checked baggage, allocated seating and in-flight meals and refreshments as part of the seat – and then at Jambojet, a low-cost-carrier where the above mentioned services are paid for in addition to you seat...was a paradigm shift for me,” he confesses.

“I had to move the focus from numbers to people. It was then that I realised that when you get it right with people, the numbers follow.”

Nuts

This low-cost carrier model is one that has been adopted by Southwest Airlines, whose story is told in many books among them Nuts! and The Southwest Airlines Way.

“I enjoyed Nuts! because it was told by an outsider looking in. You appreciate what you need to do to the customer to keep going, how to keep your staff engaged. How they value their employees and treat the customers is written all over the book,” says Ndegwa.

Open door policy

We have been told that an open-door policy shows workers that a supervisor or manager is open to an employee’s questions, complaints, suggestions and challenges. The objective is to encourage open communication, feedback, and discussion about any concerns employees may have.

“We assume that the open-door policy is for people to come in, while in essence, it’s for you to go out.”

It is for this reason that Ndegwa spends his Thursday mornings at the airport.

“I start my days at 4:45am. By 6:30am, I am dropping my Grade Six son at school. I also have a daughter in Form Three in boarding school. By 6:45 am, I am at my desk where work begins with addressing the big issues. This is my quiet time,” he says of typical days.

“On Thursdays, I drive straight to the airport after dropping my son off. When schools have closed, I am at the airport at 5:30am, just in time for the first flight to depart. There I am allocated duties for the next two hours by whoever is in charge.”

As an example, he may be assigned to check in, direct or board passengers.

“If boarding a passenger takes six minutes, I’ll take eight, so I have to start two minutes earlier to cover for the inefficiency,” he jokes, quickly adding that the interaction with both customer and employees, “allows me to interact with staff and experience what the customers are going through.”

This gives him a better understanding of the front-line employees’ work and what the customer needs so that his team can offer better service.

“This understanding is especially crucial in the service industry, where without the customer’s backing we go nowhere,” Ndegwa says.