Thursday, 7 July 2011

Interview: Titus Naikuni, Kenya Airways CEO

Consolidation on the cards as Kenya Airways launches ten-year plan

Kenya Airways is open to the prospect of merging with "like-minded carriers" in order to deliver on its ambitious ten-year growth plan, CEO Titus Naikuni has told Aviation Exchange. The industry veteran, who was last month appointed to IATA's 31-strong board of governors, said that closer cooperation with partners is a logical next step as codeshare agreements had fuelled the airline's rapid expansion.

"Kenya Airways sees benefits in consolidation with like-minded carriers," he told this news service. "This should come progressively, perhaps through cooperation initially."

Having committed to doubling its fleet size within four years, sub-Saharan Africa's third-largest airline recently signed letters of intent for ten Embraer 190s at the Paris Air Show. Its fleet currently consists of 32 aircraft, according to Ascend Online, comprising four Boeing 777-200ERs, six Boeing 767-300ERs, nine Boeing 737 NGs, six Boeing 737-300s, five Embraer 170s and two Embraer 190s. Firm orders are in place for nine Boeing 787 Dreamliners and three additional E190s.

"The Dreamliners will replace the 767s whilst the E190s will be used for capacity expansion," Naikuni explained. "The Dreamliners will be used on long-haul routes, opening up more destinations in the Far East and the Americas, and increasing frequencies to existing long-haul routes in Europe and Asia. China, especially, poses as a potential growth area due to its popularity as a trade route and increased Chinese interest in Africa."

The airline boss reaffirmed his short-term goal of operating flights to every capital city in Africa, noting that the carrier has requested regulatory approval to deploy its Embraer aircraft to this end. Describing Central and West Africa as "underserved" regions, he continued: "We recently commenced flights to Ndjamena in Chad and we will be flying to Ouagadougou in Burkina Faso by 15 July. We are looking at Kilimanjaro in Tanzania, Port Louis in Mauritius, Asmara in Eritrea and Abuja in Nigeria as additional African destinations for this year."

Turning to financial matters, Naikuni said the airline's advisers are "busy reviewing our balance sheet to determine the best financing option" for its expansion plans. The Kenyan government, which owns a 23% stake in the flag carrier, recently put aside KES 5bn (GBP 35m) in anticipation of a share offering, but a final decision has yet to be taken over any rights issue.

"We recently announced the intention to raise additional capital in order to meet our expansion plans," the CEO confirmed. "This is still under review internally. In essence we are looking at the best combination of debt and equity. The results of the analysis will also determine the ratio of leased and capitalised aircraft for business growth."

Kenya Airways took delivery of two E190s earlier this year, both facilitated by an eight-year lease with US lessor Jetscape. The deal incorporated export credit financing from Brazilian bank BNDES, and Jetscape had previously placed two E170s with the national carrier under a four-year lease on behalf of Finnair. The airline's three other E170s are on lease from GECAS, while its three additional E190s on firm order will be delivered by Air Lease Corporation in 2011/12.

Though further funding arrangements have yet to be disclosed, Kenya's flag carrier has a proven track record of expansion under Naikuni's eight-year stewardship. The airline now flies to 45 destinations in Africa – up from just 16 non-domestic African routes in 2000 – and has invested in an IATA-certified training facility which will deliver 100 new pilots this year. Kenya Airways is the only African member of the SkyTeam alliance, and its aggressive fuel policy shielded post-tax profits of KES 3.5 bn (GBP 24m) in 2010/11. "The hedging policy has worked well for us," Naikuni admitted to Aviation Exchange.

"Most importantly, we have invested in the development of a brand that is truly identified with and loved across Africa," he concluded. "We endeavour to live up to our brand promise of being 'The Pride of Africa'. With a well-executed business strategy, I believe we will be able to maintain yields in this very difficult climate."