KENYA AIRWAYS: Kenya's Premier World-Class Airline

Kenya airways was formed in the late 1970s after the collapse of the EA Airways. Kenya Airways is listed on the Nairobi Securities Exchange and one of its largest shareholders is the Government of Kenya. Of the African carriers, Kenya Airways is in the top ten category together with South African Airways, Ethiopian Airlines and Egypt Air. It is a member of the SkyTeam and African Airlines Association.

The privatisation of Kenya Airways was done in 1995 after years of being wholly owned by the Kenyan Government.This was necessitated due to the poor financial status of the company which was relying heavily on government support. Kenya Airways ownership structure has the Kenya Government own around 30%, KLM has a 26% and remaining shares are held by private investors. Shares of the airline are listed across the East African bourses of Tanzania and Uganda.

Growth

The Kenya Airways inaugural route was the Nairobi-Frankfurt-London route in 1977 in a Boeing 707-321s leased from BMA. Some of the aircraft used for domestic flights like the DC-9s and Fokker F-27s were inherited from the East African Airlines and Kenya Airways took a share of what Kenya had invested in the consortium. More Boeing planes were acquired progressively from suppliers such as NorthWest, while management consultancy was provided by international consultants.

The company continued to grow in the 1980s with more international routes being added to its international and domestic services. By 1985, the capacity of its European route had increased dramatically due to the acquisition of Airbus A310-300s which boosted its fleet significantly. The domestic route was also boosted by the purchase of several Fokker-50s. This growth continued into the 1990’s when Kenya Airways added Boeing 737-200s to its fleet.

In the mid-1980’s the Kenyan Government published a sessional paper that outlined the need for growth of the economy. The paper noted that for Kenya Airways to prosper and take advantage of the growing airline industry, it had to privatise. This would inject the much needed funds to the company without drawing money from the national treasury.

Consultants in the airline industry were hired to give advice on the privatisation process led by SwissAir who provided advice on the management side. A managing director was picked from the private sector to lead the management team in the privatisation effort. These actions led to Kenya Airways recording its first profit in the fiscal year 1992/1993 which was a positive sign that the airline could deliver value to its stakeholders.

The next stage was to look for a strategic partner to bolster the airline’s move to be a world class company. Several of the world’s major airlines at the time including British Airways, KLM, Lufthansa and South African Airways bid in the competitive process. Eventually, KLM , the Dutch national carrier, was awarded the tender to oversee the privatisation of Kenya Airways.

KLM acquired a 26% stake in the company which was eventually listed at the Nairobi Securities Exchange in an Initial Public Offering (IPO) that generated a lot of local and international interest. The Government of Kenya kept 23% of its stake while the general public and foreign investors were left with the remaining 51%. Foreign ownership was however restricted to 49% so as to protect the public interest.

Kenya Airways currently has roughly 3900 employees of different cadres from pilots, engineers, stewards, accountants to porters and cleaners.

Kenya Airways has always maintained a high level of safety over the years and is ranked well by international standards. However, this clean record has occasionally been tarnished by a few serious accidents that have resulted in the death and injury of a number of its passengers:

Kenya Airways Flight KQ431- An Airbus A310 from Abidjan, Ivory Coast crashes into the Atlantic Ocean shortly after take-off, killing 149 passengers. This happened in the year 2000.

Kenya Airways Flight KQ507 Accident – Doula, Cameroon: This accident occurred in 2007 when a Boeing 737-800 crashed in Doula, Cameroon shortly after take-off killing all 114 passengers on board.

Kenya Airways has had mixed performance over the years because of a variety of reasons. In the stock market, the share price has also shown mixed performance though it is on an upward trend generally. Operational costs have been a big problem largely influenced by the price of oil and payroll costs. The large investments in new planes and routes has also eaten into its profits with dividends being withheld from shareholders for many years.

Kenya Airways has code-sharing agreements with a number of airlines such as:

• Aeroflot
• Air France
• Air Mauritius
• Air Namibia
• Alitalia
• China

The airlines mentioned above are just a few of the airlines that Kenya Airways has partnered with to share routes that they have been licensed to operate in.

Kenya Airways plans to increase the number of destinations to 24 by the year 2021 in a project known as Mawingu (Swahili for clouds). This is part of its long term strategic plan that includes the modernisation of its fleet by purchasing Boeing 787 Dreamliners. These Dreamliners are to be delivered beginning April 2014 and Boeing will deliver one Dreamliner each month until November 2014.

The airline also has plans to increase its cargo handling business by leasing freighter aircraft to boost cargo capacity.