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Our profit on each passenger can't buy a good cup of coffee, KQ official says

By Dominic Omondi | Published Sun, April 26th 2015 at 00:00, Updated April 25th 2015 at 22:25 GMT +3
Kenya Airways CEO Mbuvi Ngunze. He recently announced the airline would sell its older planes and part of its land holdings to help offset this debt.

 

A senior Kenya Airways official has compared the airline’s return per passenger to what hoteliers make on a cup of coffee.

Speaking at last week’s annual African Business Travel Association (ABTA) forum, attended by a cross section of players in the travel industry, Regional General Manager for Kenya Airways, Dirk Buitelaar said: “We do not make any more money per passenger than a cup of coffee — and it is not a good cup of coffee.”

He attributed this to the “super expensive” cost of airline operations, especially on the African continent.

“If I fly from Nairobi to South Africa, I fly over seven countries,” he said, and pays a cost for flying over each foreign air space.

The national carriers also have to pay for flight control in these countries, as well as for using navigation aids, Mr Buitelaar added.

“And airports open at night [so] I pay for that electricity,” he said.

“If my son came and said he is working in the airline industry, I would shoot him,” Buitelaar joked, before adding that people need to be sensitised on such expenses to understand the difficult environment Kenya Airways operates in.

According to Buitelaar, this means if KQ carries 400 passengers in one of its planes, it makes an average Sh250 in profit on each passenger, which adds up to just Sh100,000 one way.

Kenya Airways has in recent times been struggling with huge debt burden, amounting to Sh77.8 billion as at September last year. This amount comprises short-term loans, cash owed to suppliers and pre-payments due in advance of carriage.

The airline made a loss of Sh12.5 billion in the six months to September 2014; the first half of its current financial year.

Debt management

KQ CEO Mbuvi Ngunze recently announced the airline would sell its older planes and part of its land holdings to help offset this debt.

The airline, he added, was also negotiating a bridging loan to help it through difficult financial times occasioned by a drop in passenger numbers.

Mr Ngunze took over at the airline in November last year after long-serving CEO Titus Naikuni exited. In past interviews, he has said the airline is prioritising debt restructuring to help it overcome its financial troubles and get back to generating cash.

Another part of the airline’s recovery plan, Buitelaar said, was a greater focus on partnerships and consolidation.

 

Thanks to consolidation, he said, KQ is now flying 10 times to China each week.

“The future of the [airline] industry is consolidation. There is no other way but to consolidate because as individuals you won’t be able to survive in the global market,” he said, noting that the objective of this strategic direction is to respond to customer needs.

Buitelaar noted that new partnership plans are at “an advanced stage”, and would see the carrier work with more regional players.

KQ is also banking on technology to lower its costs of operation, and has already launched a new booking engine.

The company, in partnership with travel technology firm, Amadeus East Africa, is creating a data entry application that will enable agents communicate more seamlessly with customers.

“As long as the agency knows, the customer knows,” said Buitelaar.

“It is all about the future of the customer.”


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