Kenya Airways to launch low cost subsidiary in quarter one

Kenya Airways to launch low cost subsidiary in quarter one

By WANGUI MAINA

IN SUMMARY
Mr Titus Naikuni, the Kenya Airways CEO, said Thursday that the budget unit —Jambo Jet—will start flying in the three months to March.
Jambo Jet will mainly operate on domestic routes and use some of Kenya Airway’s older fleet, Mr Naikuni said.


Kenya Airways will launch its low-cost subsidiary in the first quarter of next year, opening a new battlefront with budget operators such as Fly540 for control of East African routes.

Mr Titus Naikuni, the Kenya Airways CEO, said Thursday that the budget unit —Jambo Jet—will start flying in the three months to March. The announcement comes weeks after the carrier named the head of the subsidiary.

READ: KQ picks CEO for low-cost subsidiary

The national carrier said that its half-year performance had improved on increased passenger traffic and cost saving, putting it on course to recover from the Sh7.8 billion loss it posted in the year to June.

“In the first five months of this year we have seen a turnaround,” Mr Naikuni said.

Drop in passengers

This is a reversal from last year’s trend where a drop in passenger traffic saw revenues plunge by Sh9 billion to Sh98.8 billion, posting a loss of Sh7.86 billion in the year to March compared to a profit of Sh1.66 billion.

KQ’s passenger numbers rose to 932,912 in the three months to June compared to 841,223 in the same period last year, helped by increased traffic on its domestic, Africa, Middle East and Far East routes.

Besides growing traffic, KQ’s management promised to cut costs to recover from the tough two years. Citigroup projects the airline to post a net loss of Sh3.1 billion in the current financial year ending March 2014 on higher costs that will eat into sales.

Jambo Jet will mainly operate on domestic routes and use some of Kenya Airway’s older fleet, Mr Naikuni said.

The budget unit will have a leaner cost structure compared to those of international airlines. It will be hinged on low fares and fewer comforts and passengers could be asked to pay for extras like food and baggage.

The low cost business model will help KQ tap the rising passenger numbers within the region and match competition from budget operators, especially from European carriers looking at Africa.