Kenya Airways is set to form a low-cost subsidiary to handle its regional operations, opening a new battlefront with budget operators such as Jet Link, Fly540 and Air Kenya for control of the Eastern Africa routes.
The launch of the KQ’s budget line — Jambo Jet — marks a u-turn after the airline absorbed its then low-priced unit known as Flamingo Airlines to its group operations in 2004.
The rise in passenger numbers within eastern Africa, including Uganda and South Sudan, coupled with the rising competition for control of this market seem to inform the national carrier’s decision to establish a subsidiary for local and regional flights.
The airline’s CEO Titus Naikuni said on Monday that the regional unit will have a leaner costs structure compared to those of international airlines—signalling a cost-saving plan that will strengthen its hand in the ongoing price war.
“Jambo Jet is being formed and we are still in the early stages of it,” said Mr Naikuni without giving details.
This is the latest signal from KQ of its intention to wrest regional routes from rivals Jet Link, Fly540 and Air Kenya that have in recent years been aggressive in pursuit of the ever growing passenger base. It also part of the global trend where international carriers are forming subsidiaries to handle local routes and free executives to handle the more complicated international travel besides enjoying costs savings from leaner operations.
South African Airlines runs the local Mango Airline while British Airways has a majority stake in Comair—which serves southern African nations including Lesotho, Namibia and Botswana.
Kenya Airways generates about five per cent of its sales from its Kenyan routes and is keen to grow this share to double digits as the rising middle class opts for air travel over road transport.
The formation of the East Africa Common market coupled with the split of Sudan, which has created Africa’s newest state South Sudan, has also created increased air travel in the region.
Other regional operators reckon that the KQ budget subsidiary will renew to renew the ongoing battle for control of the domestic and regional markets with pricing set to emerge as key market share driver.
The national carrier has been cutting fares on its domestic routes.
“When an Airline like Kenya airways enters the business you are in, you must be prepared or risk being pushed out of business,” said Nixon Ooko, the operations director at Fly540.
The national carrier has been cutting fares on its domestic routes.
“When an Airline like Kenya airways enters the business you are in, you must be prepared or risk being pushed out of business,” said Nixon Ooko, the operations director at Fly540.
Post Credit. Business Daily
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