Momentous changes at Kenya Airways

Kenya Airways has come a long way since the KLM investment in January, 1996, and its public flotation in June, 1996. The Kenyan airline’s new shareholding structure symbolises the momentous changes that have been wrought.

The Kenyan public and institutions hold a total stake of 34%; KLM Royal Dutch Airlines holds 26%; the Kenyan Government 23%; International Emerging Market Funds hold 14%, and the airline’s staff 3%. A total foreign investment of US$35 million was raised from the flotation. In addition, the airline now has 113,000 Kenyan shareholders. 

Managing Director Brian Davies explains that the first phase of the network integration between Kenya Airways and KLM involved the optimisation of spoke-to-hub services, with Kenya Airways feeding more traffic into its hub in Nairobi from its expanded regional services in Africa and then the two partners increasing their frequencies between Nairobi and Amsterdam to six per week. The second phase involves the co-ordination of their intercontinental operations. 

The two airlines now have joint sales offices in Nairobi, Dar-es-Salaam, Lilongwe, Lusaka and Johannesburg. This has provided major cost-savings, a higher profile, higher quality and greater market penetration, says Davies. In addition, they now have joint purchasing, common computer systems and joint aircraft handling in London, Amsterdam, Nairobi, Dar-es-Salaam and Johannesburg. Meanwhile, Kenya Airways is adding two new Boeing 737-800s to its fleet and has exercised one of its two options on additional 737-300 aircraft. 

But it has not all been plain sailing for Kenya Airways since June, 1996. The consequences of the airline’s protracted dispute with its pilots are still being felt today. An Industrial Court in Nairobi ordered the airline to increase the pilots’ pay, as well as pay arrears. This has affected the airline’s financial results, says the management. 

Furthermore, the move to the private sector has imposed certain demands on the airline. For example, its shareholders are now seeking a return on their investment and will not take kindly to any downward trend in the airline’s share price.