21 January 2018

Kenya Airways Banks On Pricing, On-Board Experience for Success

Photo: Daily Nation
(File photo).

Ticket pricing, on-board experience and choice of aircraft will be the main factors that Kenya Airways will be banking on to win passengers over as it starts its long haul flights to New York later this year.

The carrier will become the third African airline to fly directly to New York, after South African Airways (SAA) and Ethiopian Airlines.

Kenya Airways will have an introductory price of about $800 for an economy ticket: Gulf carriers charge the same for a premium economy flight with a minimum two-hour layover in Dubai or Abu Dhabi International Airport.

Kenya Airways chief commercial officer Vincent Coste said that KQ's route strength will be the elimination of the layover time for time-conscious travellers.

"By reducing flight time by about seven hours, and with a non-stop flight, KQ will offer a competitive service from the US to East Africa," Mr Coste said.

African airlines

The African airlines that currently fly directly to the US use similar wide-body aircraft. SAA operates the Airbus A340-600s and Boeing 777-200 on flights to Washington and New York. Ethiopian operates Boeing Dreamliner 787-8 and occasionally Airbus A350-900 aircraft.

In terms of comfort, SAA's wide-body Airbus A340-600 aircraft and Ethiopian's Airbus A350-900 have been rated by industry experts as offering a better flying experience for passengers than the advanced Boeing Dreamliner 787-800 that Kenya Airways and Ethiopian use.

According to Airbus, its economy cabin has legroom of up to 86cm, offering extra comfort for long-haul travel. The Dreamliner 787-8 has 69cm of legroom. The Airbus seats are 45.7cm wide, about 2.5cm more than the standard-width seats featured on the Boeing.

To some this may not be a big deal, but cramped seating is a complaint frequently heard from economy-class passengers. These few centimetres can make a big difference on long haul flights.

The Airbus also boasts of the tallest ceiling of any commercial aircraft, as well as larger overhead bins allowing for ample stowage space for passengers.

Besides comfort, the viability of daily flights on a route that has previously been rated as low revenue with few passengers is questionable.

The Africa-Europe route accounts for more than half of passengers travelling overseas. Data from the African Airlines Association (AFRAA) and the International Air Transport Association shows that the North America-Africa route has the lowest returns measured by revenue passenger kilometres.

West African hubs

Kenya Airways is also hoping to use West African hubs for onward passengers as is done by Ethiopian.

"We are targeting to offer the corporate and premium leisure market more connection points in East Africa through our Nairobi hub," Mr Coste said.

Until 2015, SAA served the New York market via Dakar but stopped because of low pick-ups in Senegal.

"SAA saw limited demand for Dakar-New York and concluded that the premium demand for Johannesburg-New York non-stop was worth the extra cost associated with not filling the A340-600 passenger cabin to maximum capacity and restricting belly cargo," the Centre for Aviation says in its analysis of the North American route.

KQ may be targeting this West African market to fill its aircraft.

Feeder hub

Kenya Airways hopes to create an East African hub in Nairobi tagging travellers and cargo business from the region, southern Africa and the Indian Ocean islands market.

The hub will be fashioned alongside West African hubs created by SAA in Accra and Ethiopian Airlines in Togo, which they use to feed onward to the US.

On its North African route, SAA has over the past three years faced a reduction in load factor every year as a result of reductions in fares and traffic that is mostly outbound. Washington has proved a more profitable destination through new West African hubs in Ghana and Cote d'Ivoire.

The airline also now depends on its codeshare with Africa World Airlines (AFA), which provide feeds in Accra from Ghana and Nigeria.

Ethiopian Airlines has been relying on Lome to offer its passengers connections in West Africa through ASKY. Since launching its Los Angeles connection via Dublin, Ireland in June 2015, Ethiopian has achieved an average load factor of up to 80 per cent, making it one of its most profitable routes. A load factor of 74 per cent is considered profitable.

From its main hub in Addis Ababa, Ethiopian also offers its connecting passengers from the US connections to East and southern Africa, a hinterland that Kenya Airways also aims to tap from.

Return flights

On return flights, African-based carriers are also struggling with feeds from their code share partners in the US who are now focused on their domestic sales channels.

"Foreign carriers have generally seen availability of domestic feed to onward Africa flights in the US shrink as domestic load factors have increased and US alliance members have focused on their sales channels and their joint venture partners, leaving the African carriers alliance members with limited access," CAPA says.

Kenya Airways will also be looking to get a share of the cargo market on the route. This has been dominated by Ethiopian through exports of flowers and tea to North America. West Africa sells a third of its exports, including cocoa, precious metals and coffee to the US and Canada.

Data from AFRAA shows that Johannesburg still remains the continent's biggest freight hub, followed by Cairo, Nairobi, Addis and Nigeria. However, the freight market to the US requires an onward feed to make profit.

In its latest financial report, SAA says the Americas, while still positive, have shown only modest performance mostly due to capacity constraints on inbound freight, particularly from North America.

However KQ says it will target a niche market on the Nairobi-New York route, estimated to have a potential of two tonnes and seven tonnes from each end, respectively.

"The sales approach will focus on niche segments of valuable cargo and express. The daily frequency is a natural attraction for express business. Dense perishable product segments will be a secondary tier," Mr Coste said.

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