7 January 2008

East Africa: Fares High Despite Extra Airline On Entebbe Route

Nairobi — Two months of renewed competition on the Entebbe-Nairobi route have failed to bring significant reductions in air fares, with passengers still having to fork out between $301 and $558 for return economy class tickets for the one-hour flight.

Air Uganda's entry into the route on November 15, 2007, was expected to exert downward pressure on fares, but industry sources now say that apart from an increase, concession fare seats on offer, prices have not changed much in real terms.

Analysts say the upside of persistently high fares is that the route is likely to continue attracting new players who will explore different cost models to bring choice to the market, although how many eventually get to operate will largely depend on the attitude of regulators who still have to give new operators the nod.

This view gained credence with the December 31 entry into the route of Nairobi-based African Express Airways with two flights a week. Despite the low frequency and limited capacity of only 30 seats per flight, it is being seen as an early indication of possible expansion into Uganda by more of Kenya's domestic and regional airlines.

The service, which commenced with an all inclusive one-way fare of $100, appears to confirm rumours in air transport circles that a number of Kenyan operators are keen to take a slice of the market on a route considered to be one of the most profitable in the region, and currently dominated by Kenya Airways.

While the much anticipated crash in fares with the entry of the Aga Khan Fund for Economic Development sponsored Air Uganda on the route last November has not come to pass, the prevailing view in Uganda air transport circles is that the startup is unlikely to make any significant impact on pricing until it can get into interline agreements with onward carriers out of Nairobi to increase its uptake of traffic and address its cost base by introducing more fuel efficient aircraft.

Analysts argue that the high ticket prices are likely to continue attracting new players who will explore different cost models to develop a niche of the route because it is still possible to offer a cheaper product on the route.

To circumvent regulatory hurdles that would have pushed back its start date, African Safari Express opted to operate trip charters using a wet-leased 30 seat Embraer regional aircraft owned by Ugandan operator Royal Daisy Airlines.

Officials at the Uganda Civil Aviation Authority confirmed that African Safari Express had not applied for a licence to operate scheduled services as yet but could still do business as ad hoc charters only require notification for each intended flight.

"We have not received any application for scheduled passenger services from African Express but if their schedule becomes regular, then they will need to be licensed as a scheduled operator," authority spokesman Ignie Igundura told The EastAfrican.

According to local agents Royal Daisy Airlines, the twice weekly service is initially operating as a charter out of Nairobi on Tuesdays and Fridays although only one-way fares were available to passengers departing from Entebbe.

"We cannot sell return fares for now because the return leg is normally fully subscribed as a charter," a source said in response to enquiries by The EastAfrican.

Royal Daisy chief executive Daisy Roy however confirms that they were only carrying passengers on behalf of African Express Airlines who are wet-leasing the latter's equipment and the schedule would be updated to a daily service depending on how demand grows she said.

"Business is good because we are almost filling the cabin and the client is flexible enough not to interfere with our existing commitments," Ms Roy told The EastAfrican.

Royal Daisy is one of two Ugandan-owned airlines plying the Entebbe-Juba route daily. Recently, they were joined by Air Uganda, whose three flights a week are causing jitters in the market because of the larger carrier's potential to edge out smaller rivals.

Ms Roy says her firm and the other operator Eagle Air, are between them offering 98 seats daily between Juba and Entebbe but the entry of Air Uganda with its 200 seats per circuit is pushing the market towards over capacity.

"We are there for now but I think if they went daily, it would no longer be viable for the smaller players and we might have to look at developing new routes," she said.

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