The battle for domination Africa’s Skies hots up


 KENYA AIRWAYS, Africa's youngest and third largest Airline has jolted the African aviation industry.

Her  cash call by way of a rights issue worth US$250.2 million was approved by Kenya's capital markets Authority two weeks ago.
Top: SAA, Middle ET and KQ: The upstart rocking
the African Aviation sector

The money, said the airline,
 was to replenish its war chest. It plans buy 76 new aircraft by 2021.It also plans to expand to 60 new destinations over the same period. 

In terms of averages, Kenya airways will acquire 8 new aircraft a year between now and 2021. It will also expand to six new destinations every year over the same period. At the end of that period, the airline will have total fleet of 107 aircraft from the current 36( see www.Kenya-irways.com)

The battle for domination of African skies has been driven a notch up. By floating the rights issue, the airline declared its intention to either dominate or increase its presence in the Africa airspace.

Kenya Airways is the only successful privatised airline in Africa- and perhaps in the world. It is the youngest airline in Africa being only 36 years old but it is a major player in African aviation industry. It is owned 26 per cent by Air-France-KLM, 22 per cent by the Kenya Government and the rest by private investors. It competes for domination of the African skies with Ethiopian Airlines (ET) and South African Airways, SAA. Both SAA and ET are the oldest airlines in Africa. In fact SAA is among the oldest airlines in the world being 77 years old. ET is 65.

South African Airways (SAA) is the largest airline in Africa boasting of 53 aircraft. In the year 2010/11 it ferried some 8.5 million passengers compared to her competition in Africa. Ethiopian Airlines ferried 3.15 million while Kenya Airways ferried 3.13 million passengers over the same period (see www.flysaa.com). 

                                                               
ET is the second largest airline in Africa boasting of 48 aircraft but could soon be neck-on-neck with SAA for she has a firm order of another 35 aircraft.  This would raise ET’s fleet to 83 in the next decade or so. Hot on the heels and even the most dramatic expansion is KQ’s who plans to increase its fleet from 34 to 107 in ten years. This means that KQ, as Kenya Airways in known, will be competing neck-and neck with ET on fleet expansion.(see www.flyethiopian.com)

 SAA boasts of 53 long haul passenger aircraft including 21 B737-800, 6 A340-300, 9 A340-600, 11 A319-100 and 6 A340-200.The Ethiopian boasts of;:5 B777-200LR;11 B767-300ER,& B757-200ER;5 B737-700 and 6B737-800ER. She also owns six are cargo freighters and another eight   Short Range aircraft meant for domestic and short range aircraft. Effectively then the Ethiopian has just about 34 long range passenger aircraft. However, she has another 35 aircraft on order including including10 ultra modern Boeing 777-800 Dream liners and other top of the range long range aircraft from both Airbus and Boeing.

Kenya Airways for its part boasts of: 4 B777-200ER; 6 B767-300ER; 5 B737-800; 4 B737-700; 6 B737-300; 5 Embraer 170 and 4 Embraer 190. The Embraers are short range while the Boeings are long haul aircraft. The airline has placed a firm order for 6 ultra-modern B787-800DL. It is not clear whether they form part of the 79 strong arsenal or they are a separate kit.

In terms of profitability, the Ethiopian is the leader in profitability having bagged some US$246 million in 2009/10 financial year. South Africa Airways made some US$110 million in the year 2011 while Kenya airways bagged US$4.4 million in the year 2010/1.

SAA, is  yet to recover from its  financial doldrums. It has been on a loss making streak since 2001 when a fuel hedge book went berserk.  The south Africa press reports that the airline has applied for a R5 billion( US$590 million) bailout from the government. In the last decade, the airline has lost R17 billion( $2.005 billion).The aviation industry is said to be livid with the current application. 

Such inability to get out of its own from its owns quagmire puts doubts on the airline's ability to challenge the dormimance of ET and KQ on African airspace. However, profit is a function of the size of the market and the population of the hardware. 
               
Apart from hardware advantages, physical location could also play a major role on determining who has the largest pie. Kenya Airways’ home base is Jomo Kenyatta international Airport in NairobiNairobi is a natural hub of the continent being located, as it were, in the middle of the continent.  Its location makes connections to and from other destinations in Africa convenient. It also makes connections from Africa to the rest of the world seamless. That location could be KQ’s selling point.
The Airport itself is undergoing massive expansion which includes the construction of a green field terminal that will raise its capacity to 20 million passengers. The Greenfield terminal to be developed in two phases will expand JKIA’s capacity by 12 million passengers to more than 20 million passengers a year in Phase I. It will have a parking capacity, including “remote parking” for 60 aircraft bringing the total number of available parking slots over hundred aircraft. 
This could give a larger Kenya Airways advantage over the competition. With these new developments, the aviation industry in Africa will never be the same again. The battle for the control of African skies is headed for quite interesting times. The recovery of the formerly cirrhotic South African Airways will make the battle for African skies a battle royale. 

With the stage looks set for a tough battle for the domination of Africa skies, the question remains: who shall gain the most. Only time will tell who the real winner is-passengers perhaps.


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