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Kenya banks on direct flights to boost trade with America

NEWS
By Macharia Kamau | October 28th 2018
Transport CS James Macharia, US Ambassador Robert Godec and Kenya Airways CEO Sebastian Mikosz holding a last point of departure certificate. 

Kenya Airways will this evening commence nonstop flights to the United States, which completes a process that has been in the works for more than 10 years.

The daily flights to New York’s JF Kennedy International Airport are expected to substantially boost the struggling airline to grow revenues as well as enable local industries increase exports to the American market and draw more US tourists to Kenya.

Kenya Airways (KQ) becomes the fifth carrier in Africa to make direct flights to the US with the other four in what can be termed as an elite club being Ethiopian Airlines, South African Airlines, Egypt Air and Senegal Airlines.

KQ Chief Executive Sebastian Mikosz said the airline is looking to connect the East African region to the East Coast of the United States, with Nairobi serving both as a destination and a hub for people travelling to and from the region.

Offers link

Currently, Ethiopian Airlines through its Bole International Airport hub in Addis Ababa offers such a link.

“We will be offering a big added value to Kenya and the region. We are thinking beyond Nairobi and have our eyes on Sub-Saharan Africa. We will offer connections to numerous cities in the region,” he said in a recent media interview.

“We are aiming to connect the East Coast of Africa and East Coast of the US…We are living in a continent of over a billion people and we are the fifth airline to fly direct to the US. Nairobi will be the seventh city in Africa.”

Ethiopian Airlines currently seen as the dominant carrier in Africa and has in the recent past acquired and partnered with numerous smaller carriers across the region in a bid to remain ahead of competitors.

It might have an upper hand considering the heavy support by its government but Mr Mikosz said when it came to operating direct flights to the US, the competition would be healthy with the two carriers pushing each other to be “better” while increasing the much needed traffic between the region and North America.

“The better Ethiopian is, the better KQ is,” he said.

KQ expects the route to account for 10 per cent of its revenues in 2019, which would translate to about Sh10 billion, going by its performance in 2017. The airline reported revenue of Sh106.28 billion in the year to March 2017.

Game changer

Transport Cabinet Secretary James Macharia says the direct flights will be a game changer not only for KQ but to the Kenyan economy.

“From the enthusiasm we are seeing from travellers it is clear people have been waiting for this and they want to travel,” he told Weekend Business.

“The US is already our biggest source of tourists and one of the biggest importers of Kenyan goods and this is before the direct flights. The shorter travel time and cheaper connection fees between the two countries definitely means more business,” said Mr Macharia.

The flights to US are expected to contribute in direct and indirect job creation. KQ expects to hire about 150 people to fill various roles that will facilitate the new route.

According to the Kenya Economic Survey 2018, industries engaged in production of goods for export to the US under the African Growth and Opportunity Act (Agoa) initiative employed 44,000 people by December 2017 and exported goods worth Sh32.8 billion to the US.

Total exports to the US stood at Sh47 billion. The Trade ministry is currently evaluating modalities to grow exports under Agoa.

The number of tourists from the US stood at 148,000, contributing a substantial chunk of the 1.24 million tourists to Kenya in 2017.

Kenya Tourism Board Chief Executive Betty Radier said the direct flights will be a major boost to tourist arrivals from the US market, which is currently Kenya’s top source market.

“We expect a 15 per cent increase in arrivals from the American market. Besides, the flight, which will be the first direct flight from East Africa to the US, will strengthen Nairobi as a hub destination for travellers transiting through while heading to the US,” she said.

Non-stop flights between Nairobi and New York will take between 14 and 15 hours. This is in comparison to more than 20 hours on flights currently servicing the route that have stop-overs in other cities in Europe.

For instance, connecting through London takes more than 23 hours while through Amsterdam takes one 24 hours.

The direct flights come on the back of the complex restructuring that KQ undertook and completed last year.

Increased stake

The reorganisation, which entailed conversion of debt into equity, resulted in the Government substantially increasing its stake to 48.9 per cent and also saw a consortium of local banks become the second-largest shareholder in the airline with a 38.1 per cent stake.

The national carrier is also pushing to run JKIA. The plan, still in its early stages, has already received Cabinet backing and now awaits regulatory approvals.

The airline said the partnership would result in speedier solutions to certain challenges at the airport that take long to resolve due to bureaucracy that ties down Kenya Airports Authority. 

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