Kenya Airways plane taking off
Kenya Airways has the most expensive tickets among airlines operating in Africa, charging more on average than carriers such as Ethiopian Airlines, South African Airways and Air France.
A new study by competition authorities representing a total of 24 African countries found that KQ, as the airline is known by its international code, charges the highest average fares on domestic and international flights.
The finding shows the national carrier risks losing market share to cheaper rivals like Ethiopian Airlines and new entrants, including Uganda Airlines.
KQ had higher fares on most routes where it has competition, though there are a few instances where its rivals charge more.
“Kenya Airways has the highest average passenger price per kilometre (APPK) for all its domestic, regional and international routes,” the report by the African Competition Forum (ACF) says.
“In addition, the routes for the Tanzania markets from Nairobi have higher APPK than international routes, which are longer distances.”
Kenya Airways’ average price per kilometre on the Nairobi-Johannesburg route, for instance, was KSh23.8 compared to KSh22 charged by South African Airways (SAA).
“Prices charged by two operators on this route are visibly different for both economy and business class categories. Kenya Airways prices are 21 percent higher than SAA prices for economy class tickets,” the report says.
“For business tickets, SAA prices are significantly higher than Kenya Airways prices. Kenya Airways on average charges R14,089 (KSh106,000) for a business class ticket, while SAA charges R22,954.93 (Sh172,796) for the same class. SAA’s upper-end tickets sell at around 39 percent more than Kenya Airways prices.”
The Kenyan carrier charged an average of KSh9.4 per kilometre on the Nairobi-Paris route compared to Air France’s KSh8.3.
“The Nairobi-Paris route is served by Air France and Kenya Airways, their prices have a difference of KSh5,000, Kenya Airways price being more,” the report says. KQ charged Sh15.6 per kilometre on the Nairobi-Addis Ababa route, higher than Ethiopian Airlines’ KSh13.2.
The Competition Authority of Kenya (CAK) is among the regulators that participated in the cross-country study of airlines.
The ticket pricing data was gathered in October 2019 from airline websites for 12 dates between November 2019 and March 2020.
To ensure consistency of the data, the prices for each route was collected from the websites on the same day for all the airlines operating on the selected routes.
The study noted that some airlines have since exited a number of the routes due to Covid-19 pandemic or other reasons. The regulators say the study was done to collect data on the status of the aviation sector and address competition concerns.
KQ’s expensive fares have not helped its bottom-line, with the airline making losses since 2013.
It reported a net loss of KSh11.4 billion in the half year ended June, narrowing it from KSh14.3 billion a year earlier on lower costs. Revenues over the same period declined to KSh27.3 billion from KSh30.2 billion.
The pandemic has further hurt KQ, which had been suffering from the missteps of previous management as captured by a May 2015 Senate committee probe. These included poor investment decisions of buying and leasing aircraft.
Others are fuel hedging under arrangements that are not profitable to the company, thereby leading to high indebtedness.
The pricey tickets were also highlighted by the committee but the airline has been unable to lower its charges even as customers defect to rivals.
The probe established that KQ’s expensive ticketing was not competitive in the market, leading to loss of passengers as well as revenue.
The study found that the national carrier has a market share of 48.7 percent of international flights originating from Kenya. Its share of domestic flights, including its subsidiary Jambojet, stands at 36 percent.
The study brought together competition agencies of South Africa, Kenya, Zambia, Nigeria, Angola, Mauritius, Gambia and the Common Market for Eastern and Southern Africa (Comesa).
It covered fares on domestic as well as international flights to destinations like Johannesburg, Doha, Mumbai, Paris, Dar es Salaam and Lilongwe.
The report found that many factors influence the setting of ticket prices, including competition, government support and bilateral agreements.
KQ is among the airlines that have continued to benefit from government support in the form of bailouts and tax exemptions.
The Treasury is the biggest shareholder in the national carrier with a 48.9 percent stake.
Kenyan Parliament voted in July 2019 to nationalise the airline but the process has been delayed, with the company saying it needs more billions of shillings worth of bailout money to keep going.
The Treasury recently said more funds will be provided to KQ in the next fiscal year starting July 2022.
Ethiopian Airlines, one of KQ’s major rivals, is also supported by its government and sole shareholder which has exempted the airline from paying value added tax.
-Business Daily
