The aviation industry places hope in a new regime to get it out of the turbulence

A Kenya Airways aircraft flight from Kigali, Rwanda lands at JKIA during the launch of the resumption of international flights at JKIA on August 1, 2020 [Elvis Ogina, Standard]

The aviation industry is heavy on the hope that President William Ruto’s regime will lift it out of the turbulent skies it currently flies through.

High on the list of priorities are an overhaul of Kenya Airways, enforcement of the Open Sky policy, cutting aviation taxes to rein in high airfares and giving the industry a stimulus package to lift carriers anchored by the Covid-19 pandemic.

These, together with the formulation and implementation of a national aviation policy, are some of the issues that stakeholders in the aviation industry want to see resolved.

Stakeholders, perhaps encouraged by the inclusion of the aviation industry in President Ruto’s manifesto, which hints at new efforts to help KQ improve its fortunes, are eager for the new administration to help the industry recover.

And it’s not just KQ who is going through tough times. A number of local carriers that anchored their operations at the start of the Covid-19 pandemic have struggled to recover.

Although the new administration has not yet released details on how it will turn KQ around, it has said it will get the national carrier back on its feet within a year and reduce its reliance on state bailouts.

Finding a cure for long-suffering KQ has proven to be a headache for previous governments, with the airline gobbling up billions in bailouts with no sign of recovery.

To address the carrier’s problems, the Kenya Airline Pilots Association (Kalpa) said there was a need to reshuffle the carrier’s management and board, to inject fresh thinking into KQ’s future.

The pilots’ union believes that KQ’s current organizational structure reflects that of a financial institution and not an airline, which is why the carrier continues to be in the red.

Kalpa proposed the inclusion in KQ’s board of directors of players from different industries heavily dependent on the airline such as horticulture and tourism, noting that these sectors suffer severe blows whenever there are inefficiencies within the airline.

The union also wants more technicians, such as pilots and engineers, in KQ management. He says the government should first initiate a critical change in leadership that will facilitate a transparent review.

Continental partnerships

“Organizational structure is at the heart of everything, and in KQ’s case, it’s the heart of the matter,” Kalpa said.

“There needs to be new leadership within the airline… If you look at our structure, it doesn’t align with what the main economic drivers of the airline should be like tourism, horticulture and others that bring business to KQ.”

Financial standard has not received a response from KQ management for this story as of press time.

The previous government planned to roll out a multi-year 156 billion shillings ($1.3 billion) restructuring program that included taking over debt, streamlining airline operations and possibly seeking continental partnerships for an upgrade. the scale.

According to Kalpa, among the low-lying fruits that could be big quick wins for KQ are restructuring aircraft leases and renegotiating aircraft fuel and oil supply contracts. These, the lobby notes, could give the carrier plenty of breathing room to increase revenue.

Kalpa noted that KQ’s aircraft leases are priced much higher than industry averages.

“Our monthly rental cost per aircraft of approximately $1 million (120 million shillings) is very high compared to other industry players such as American Airlines, Qatar Airways and Ethiopian Airlines who pay 625,000 (75 million shillings), $475,000 (57 million shillings) and $450,000 (54 million shillings) respectively per month on average,” Kalpa said.

KQ recently said it had successfully renegotiated aircraft leasing costs and managed to secure a 20% reduction, which it said would significantly reduce its operating costs.

The Kenya Air Operators Association (KAAO) said the country needs a strong policy that will strengthen its position as a regional aviation hub.

The association’s president, Mbuvi Ngunze, explained that a regional hub strategy such as that implemented by the Gulf States, Turkey, China and Ethiopia requires the establishment of a national policy. of aviation.

KAAO also said the local tax system has suppressed industry growth over the years. A significant portion of fares charged by carriers, including domestic routes, takes the form of taxes.

Lower taxes and even an industry stimulus package could help airlines that have yet to restart operations after being hit by Covid-19.

“Over the years, the industry has petitioned the government to overhaul the tax regime to provide the necessary relief to industry players to give them a fighting chance in the face of regional competition. and fierce international,” Ngunze said.

“In the past, when tax breaks were given by the government, the industry was able to gain access to newer and modern aircraft, a fact which has played a major role in improving safety standards.”

Tourism industry veteran Mohammed Hersi recently lobbied for international carriers to be allowed to operate scheduled flights to Moi International Airport in Mombasa.

Mombasa has in the past benefited greatly from charter flights. Hersi said that since Covid-19 charter flights have dropped significantly and the government must now consider allowing international airlines to operate scheduled flights to Mombasa.

Last week, he began mobilizing the public to sign an online petition calling on transport and civil aviation authorities to open up Kenyan skies.

Protectionist policy

In the past, the government has selectively allowed international carriers to operate flights to and from Mombasa.

However, it largely operates a protectionist policy that limits such flights and instead international airlines serve Nairobi and their passengers traveling to other parts of the country are carried by local carriers.

Hersi wants foreign carriers to be allowed to fly direct to Mombasa, said the coastal city would have 39 charter flights a week but this has been reduced to a few weeks with Moi International Airport receiving such flights.

According to him, international carriers serving the coast will give a boost to the tourism industry as well as other industries which could see cargo flights export local farmers’ products such as fruits, fish and meat. meat to international markets.

“In the golden years of tourism up to 2012, Moi International Airport was receiving 39 charter flights per week. Due to changing trends, charters are a concept that is slowing down and more and more travelers are now opting for scheduled flights,” he said, adding that airlines that operated scheduled flights before the Covid-19 pandemic have not had their licenses renewed.

“Most international travelers would prefer to fly direct to Mombasa since the majority avoid going through Nairobi. We humbly call on the new government to prioritize this issue as it is keen to create jobs and tourism is the easiest way to achieve this goal.

Hersi said the open skies had changed Morocco’s fortunes as a tourist destination, with its visitor numbers rising from two million to 12 million in less than a decade.

Liberalization has also transformed the South African cities of Durban and Cape Town, which he says have been saved from death and become major hubs for conference tourism.

KAAO is also of the view that Kenya could benefit significantly from opening up its skies. He cautions, however, that this should be done gradually, initially starting with the East African Community (EAC). A sudden opening of Kenyan skies, he warned, could lead to the unintended impact of foreign carriers on local airlines.

“Extensive research has repeatedly found that liberalization has led to increased traffic volumes, greater connectivity and greater choice and lower fares. While the open skies policy is the way forward, it needs to be tackled in a phased manner starting with various regions such as the East African Community to avoid cannibalization of local operators by foreign carriers,” Ngunze said, adding that different EAC member countries should standardize regulatory requirements.

This could however be a challenge as not all states are on the same level.

“As an industry, we have always advocated for East Africa to be seen as national. We strongly believe that reducing taxes on air passengers who exceed $100 (Sh12.00) on the cost of a ticket would spur the increase in flights and continue to generate revenue for the countries they want,” said Ngunze.

“It has been estimated that the open skies between the five EAC countries could create an additional 46,320 jobs and $202.1 million (24 billion shillings) per year in gross domestic product (GDP). I would advocate the creation of a regional champion first before going any further.

Opinions on whether to open up the African skies are divided. Attempts have been made to get individual countries to adopt the Single African Air Transport Market, an initiative of the African Union (AU) aimed at creating a liberal civil aviation market. It has, however, been opposed by some airlines who fear that other more financially muscled airlines will crush them.

SAATM, which has been in the works for years, is designed to create an airline industry similar to that of the European Union, where carriers and passengers can easily move between countries.

Through SAATM, the AU hopes to facilitate flights on the continent. SAATM has received support from aviation bodies such as the International Air Transport Association (IATA) and the Association of African Airlines.