Kenya Airways’ share value rises on improved positive market perception


(Posted 03rd April 2014)

Several factors came together earlier this week when Kenya Airways’ share price rose by 4 percent, showing some re-emerging confidence among investors that the medium and longer term prospects of Kenya’s national airline are positive.

First was the launch of Jambojet, Kenya Airways’ subsidiary company which commenced domestic flight operations from Nairobi to Mombasa, Kisumu and Eldoret, using three Boeing B737-300 leased from parent company KQ. The first two days of the latest low cost carrier to enter the Kenyan market can only be described as ‘above expectations’ according to a source close to the carrier.

Secondly and more important, this Friday will Kenya Airways receive their first Boeing B787-8 Dreamliner, after a delay of three plus years due to Boeing being unable to stick to the initial timeframe of launching this revolutionary new plane. Made largely of composite materials to save weight, and being the first commercial jet aircraft to ever be built using such materials, technical challenges needed to be resolved first before the plane was able to take to the skies. Meanwhile was Kenya Airways compelled to continue and in fact increase their B767-300 fleet in order to roll out new destinations and increased flight frequencies with the ageing jets consuming over 20 percent more fuel than the B787 is projected to consume while flying longer distances and carrying more passengers and cargo.

Dr. Titus Naikuni, Kenya Airways’ Group Managing Director and CEO, a few months ago in a conversation confirmed that the overall 6 Boeing B787-8 Dreamliners expected in 2014 will allow the airline to progressively phase out the aged B767-300 fleet, and as a result will enjoy substantial savings in aviation fuel, which now constitutes around 40 percent of the airline’s overall expenses. A further three such aircraft will then join the fleet in April, June and July of next year, reducing the overall average age of Kenya Airways’ fleet to among the youngest on the continent.

It was reliably learned that Kenya Airways will use the new B787-8 Dreamliner to train crews and technicians on the aircraft, with the first commercial flight scheduled in June this year to Paris, allowing for a far more cost effective in house training.

Additional deliveries, including a second B777-300ER due later this year, will then be used to increase frequencies to such destinations like Mumbai, Delhi, Dubai and Guangzhou before the airline can add a further two Chinese cities, Shanghai in August and Beijing in September. More new long haul destinations are planned for 2015 when all the wide bodied aircraft presently on order have been delivered to Kenya Airways.

Market confidence on improved profitability and hence better financial returns however is to a large part contingent on the Kenya Airport Authority being able to deliver additional infrastructure at the Jomo Kenyatta International Airport such as getting Terminal 4 on line, completing the assembly of a temporary terminal and perhaps equally important for Kenya Airways, to finish work on additional parking positions for the new aircrafts.

The market reaction though seems to have factored in these challengers when the share price rose by 4 percent and buoyed by the arrival of the new bird on Friday do analysts predict a gradual rise of the share value over coming months. Preliminary financial results are also expected to be announced soon for the just completed financial year 2013/14, which ended on 31st of March, the last full year Dr. Naikuni will have been at the helm of Kenya Airways, as after 11 years he will retire at the end of 2014.

Watch this space for breaking and regular aviation news from across Eastern Africa.

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