Kenya Airways: A Trailblazer in the African Skies

Once this system is in place, competitiveness is assured. This is one of the driving factors pushing the cargo division to be at par with the passenger divisions' drive to meet world-class standards. A strategy that has made Kenya Airways a leading contender for the Sky Team alliance.

Sky Team

Sky Team is a global airline alliance partnering Aero Mexico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Airlines, KLM Royal Dutch Airlines, Korean Air and Northwest. Through one of the world's most extensive hub networks, Sky Team offers its 341 million annual passengers a worldwide system of more than 14,000 daily flights covering all major destinations. "If we join Sky Team, it will open up immense opportunities for us. It means we can book our passengers in Nairobi to fly almost anywhere in the world," says Naikuni.

KLM, Northwest and Continental Airlines became full members of Sky Team on September 13 after the merger of two airline groupings - the Wings Alliance and Sky Team.

Fund managers at Africa Alliance of Nairobi say KQ will reap significant benefits once it joins the Sky Team, as this will turn powerful competitors on key routes into allies, allowing the company to exploit significant synergies from cross-selling and expand coverage without risking huge investment costs.

"It will improve geographical coverage, such as to the US, without additional Kenya Airways investments. It will also offer Kenya Airways a valid opportunity to overhaul its safety, maintenance and ground handling procedures in line with alliance procedures," says investment analyst Beth Munga of Africa Alliance. Naikuni adds, "network plans are majoring on Africa especially where KQ can offer value to its potential Sky Team partners."

Cargo Space

In aviation parlance, Kenya Airways Cargo sells belly space to freight forwarding agents. This is the available space left after passenger baggage and excess baggage has been accounted for. Nevertheless, the airline does not limit selling the belly space available on its aircrafts' flights. Extra capacity is obtained by having code-share agreements in place with other airlines on routes that have high demand for cargo space. Mertens asserts that with this extra capacity, Kenya Airways is able to generate approximately $1 million a year in extra cargo revenues.

In line with increased economic activity, aviation experts project the use of aircrafts to ferry cargo, to grow exponentially in the coming years. The International Air Transport Association (IATA), Boeing and Airbus last year did a study that estimated air cargo to triple in the next 20 years. Boeing expects the world market to grow 6.7 percent annually through 2015 fuelled by many factors, including economic growth, the relaxation of international barriers, increasingly time-sensitive product delivery schedules, increased just-in-time (JIT) inventory management systems and increasing levels of international commerce.

Benefits

Kenya Airways faces a huge potential for cargo business in two ways. First, the airline has invested more than $400m in building its fleet capacity through the acquisition of the bigger B767s and B777-200ER aircraft. The new aircraft will serve the Lilongwe, Lusaka, London and Amsterdam routes, which generate a high volume of traffic and baggage.

Secondly, with the development of the Nairobi Cargo Center, Nairobi is increasingly playing the role of a cargo hub as much as it is serving as a passenger hub for the African sub continent. The 11,700 square meter cargo handling center, put up at a cost of more than Kes 1.5 billion ($18.5m) in 1999, helped boost cargo capacity at JKIA by as much as 70,000 tons. The cargo center, with a maximum capacity for up to 97,000 tons, was built to help provide efficient, high quality and competitive ramp services, cargo handling and logistics at JKIA.

Mertens says that 50 percent of the airlines' cargo traffic from Europe, 60 percent of its Dubai and Mumbai originating cargo and 80 percent of its Far East cargo is transiting through Nairobi. While this creates a lot of transit business into the continent, it also poses a huge challenge for the airline.