Wednesday, May 30, 2007

KQ hits turbulence

Down: Profits dipped slightly owing to increased competition, and the weakening US dollar. Kudos’ to the NSE for the timely release of company accounts (now if they could only offer .txt alternatives alongside the huge PDF files). Sooner or later a company is going to reach a limit - and either report flat (or declining) revenue or profits, but shareholders don’t take too kindly to the inevitable.

Pilot stabilizes: In the wake of the KQ 507 crash, the airline MD has released a statement on safety issues to quell murmurs that the airline operations were stretched in pursuit of profit. Another statement of reassurance from a former manager.

Up: The airline has been voted Africa's Leading Airline by readers of Travel News magazine. KQ also won for best regional, local airline, Msafiri magazine and frequent flier programme (with KLM).

21 comments:

David Wozney said...

Re: “... the weakening US dollar.

A “Federal Reserve Note” is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.

MainaT said...

Banks-all things being equal, a company operating in a growing economy (tourism, imports/exports, more travellers are all up), you'd expect it to see continued growth in profitability.
The exchange loss they are talking about, I am very dubious about. Are they saying they take bookings in USD? This is all hedgable in any case...

Anonymous said...

i think most companies with billing outside kenya will be exposed to currency risks esp depreciation of the dollar - Homegrown for example had to sell, In dolar terms KA performed somewhat the same as the previous year. - though me thinks their dollar denominated costs should have comedown eg loan payments and spare parts et all. Though again poor infrastructure in kenya probably prevents this gains espeacilly for companies like homegrown. factor in labor costs

I think with a grwoing economy and appreciating currency kenyans businesses need to rethink their competitive advantage - i think the key to survival in this regime is productivity.

Anonymous said...

Hmm... growing economy is good but I really want to see how it does with the increased interest from competitors.

Managment has their work cut out, I think they will have to grow or die cause alot of people will be throwing alot of money at this.

nimechoka said...

Banks,

The Standard reporter stole your title? Ama? Look at the attached link.


http://www.eastandard.net/hm_news/news.php?articleid=1143969321


You should sue!!

dropmyload said...

KQ is an interesting case: for a company that provides what is really sub-standard services (you should compare them head to head on routes where they have competition, they are pathetic!), they really make huge profits.

I think as Kenyans, we support KQ due to nationalism, but really, there is a limit to blind following.

Personally, I fly overseas at least twice a year, and it is a policy not to fly KQ after a lousy experience flying to Dubai in 2004.

Overpriced routes, poor service, low quality staff and planes, poor safety record ( crashes on 7 years is NOT GOOD, whatever one might say), it just can't go on!

Sorry guys, I think KQ profits are due to fall further, and I just don't see them as a long-term investment.

bankelele said...

David Wozney: I did not know that

MainaT: Fuel being about 1/3 of their expenditure was a factor. They do hedge, but sometimes you get it wrong
- Idealy KQ should gain from the tourist boom, but many of them come on charter flights from Europe, straight to Mombasa (then on to the Mara & other interior place). So its' Air Kenya and other local airlines that benefit

Anon: It's a year year dip I think. The shilling is not going down anytime soon, so companies will have to adjust

Anonymous 2: I think the implication was that some route flights were not full (passengers flew on competing carriers)

nimechoka: Am happy to contribute. It's a logical headline

dropmyload: As a frequent flyer, whats' you preferred airline for asia, europe & intra-African routes?

I disagree that KQ has sub-standard service. Compared to who? Emirates perhaps. Try a US airline dometic flight and you'll see how 'super-standard' KQ is

And the safety issue should not apply to KQ even though there are 2 crashes in 7 years.

Anonymous said...

@dropmyload
2 crashes in 7 years is a big deal but im sure not big enough to make you consider other airlines over KQ. my theory is that any airline is like a matatu or any other public transport....and accidents are bound to happen........

dropmyload said...

"dropmyload: As a frequent flyer, whats' you preferred airline for asia, europe & intra-African routes?"

I have been trying all kinds, but have found Emirates to be the best of the lot. However, new entrant Qatar is also excellent!!! I will be flying Virgin in July/August, so will post feedback then. (ps I got Virgin to UK at $100 cheaper, 50% more luggage allowance and the agent said she made a better commission - all after the $999 deal ended. But had to fight for a seat).

"I disagree that KQ has sub-standard service. Compared to who? Emirates perhaps. Try a US airline dometic flight and you'll see how 'super-standard' KQ is"

I think you are comparing chalk and cheese here. I lived in the US for 4 years, US doms are usually low cost carriers, you only get what you pay for. KQ considers itself "luxury", even on their google ads they talk about flying in luxury and class. I just don't see any class there. Unhappy staff unwilling to serve on board, bad meals, delays at most airports overseas, bad check-in experiences etc etc. Not good for international flights.

"And the safety issue should not apply to KQ even though there are 2 crashes in 7 years."

I think this is a major issue, which is being covered up. 2 crashes in 7 years is not few, compared to other airlines KQ competes with, such as Emirates, SAA and BA. Further, given the strange circumstances of these crashes, they are both obviously pilot errors. That in it self is a major issue.

I think we have to accept that KQ is in need of change, else we would not be seeing so much interest from other carriers in our routes. Qatar, Virgin, Singapore all here. Margins are good, competitor (KQ) is greedy, has poor staff relations, sub-standard service, its a cake waiting to be eaten.

Watch their results for next 6 months...they will reflect all this.

dropmyload said...

http://www.airlinequality.com/Airlines/KQ.htm

good reading, and factual.

Anonymouse 2 said...

"And the safety issue should not apply to KQ even though there are 2 crashes in 7 years. "

Banks, i'm curiouse why should it not apply? Please your thoughts...

And does anybody know why a < 25 year old was doing in a cockpit. What are the flight time requirements before a pilot hold the helm?

chumviKiasi said...

@dropmyload you are absolutely right. You cannot compare KQ with US domestic carriers that are mostly focused on the domestic market. In my opinion, KQ should focus more on volume than fare per seat. She cannot compete with the bigger carriers on fares as dropmyload's experience shows. KQ will stay in this rough patch unless she gets innovative and makes concrete, consistent efforts to increase quality of service and for goodness sakes please have the pilots keep the planes in the air. This latest crash is disturbingly similar to this one: http://news.bbc.co.uk/2/hi/africa/6097616.stm

Anonymous said...

Someone said:
my theory is that any airline is like a matatu or any other public transport....and accidents are bound to happen........

I am astounded by such a ridiculously stupid statement! Whoever said this clearly does not understand how the airline industry works. Safety is an airline's biggest marketing tool!!

If you cannot assure your passengers that they will not end up at the bottom of an ocean from 13,000 feat up....you will have serious problems making money (regardless of how many luxury items you tout on your flight)

KQ MUST begin to compare itself to non-african carriers (raise the bar Naikuni! and stop comparing yourself to a continent full of pathetic national carriers)

Anonymous said...

surely!
Kenya Airways - by Ian Francis
2 October 2006

Have flown several times in the last year in business class. Usually AMS-NBO and then onwards. Excellent seat (flat horizontal bed) and good service but some problems that crop up time and again: Dinner service is excrutiatingly slow, which cuts badly into sleeping time on an 8 hour overnight. IntraAfrican flights are almost always delayed 1-2 hours. Transfer desk staff in NBO are unfriendly. And once, the plane flew to the wrong country: Malawi, when it was supposed to fly to Zambia.

Anonymous said...

What?! How do you fly to the wrong country!!

bankelele said...

dropmyload: Emirates & KQ, can hardby be put in the same lague with KQ, given their petro-owners, and I'd hardly call KQ a luxury airline - they get the job done, and connect you to parts of Africa that no other airline does (at a premium fee of course).
- Even before they went in/out of bankruptcy, airlines like Northwest, TWA, United's service was wanting.
- will check out airlinequality

chumviKiasi: - I can't speculate on the crash cause at this time, but it is sad that the first KQ crash report has not been released 7 years later

chumviKiasi said...

@banks,
You mean ...not officially released
Kenya Airways Accident Report

Phil said...

There is a perception in the KENYAN investment diaspora that KQ iS sacrificing safety in the name of growth and profits, It,s time to focus on fundumentals and that includes safety and pilot training, We simply as investors dont want =to see another crash period?
phil nyc

dropmyload said...

"dropmyload: Emirates & KQ, can hardby be put in the same lague with KQ, given their petro-owners, and I'd hardly call KQ a luxury airline - they get the job done, and connect you to parts of Africa that no other airline does (at a premium fee of course)."

Banks, frankly, I see KQ limited to a pan-african carrier in the near future, with little influence on the intercontinental routes. They are competeting with serious players on those routes, and I don't think an airline with KQ's levels of service and safety has much hope out there. On flying us to and from African airports, they will do fine, given lousy competition. Revenues will drop further, it has to happen!

bankelele said...

chumviKiasi: Thanks for the link. Report is an interesting read. But KQ and/or the Ministry of Transport, having had the report for years should have formaly closed the investigation by releasing the report (like here - more recent crash reports have been concluded.

Phil: Perceptiopn is there and the managment has now set out to correct that.

dropmyload: Unfortunately KQ has shown that profitable routes intra-African exist, but I don't see Emirates trying to compete on those. They just want to get people to/thru Dubai, not from Lusaka to Lilongwe or Entebbe

Maishinski said...

I'm a KQ fan. Used to work there and I've flown in their Aircrafts to many destinations around the world.

KQ service is fabulous if compared to European carrier's domestic services. If you compare intercontinental flights then its probably a matter of who is on board (service is great if there's an MP or senior executive on board) and what cabin you're in... Consistency bado...

Two avoidable Crashes in 7 years. Honestly it's hard to defend that. It's a lousy, lousy record.

Probably would have been avoidable because:

1. It has been reported that other pilots chose not to fly in that weather. What made them arrive at that decision? Experience? Training? Loyalty/commitment? Risk awareness?

2. Plane was probably illegally overloaded (corrupt ground staff), leading to improper balancing.

3. The first crash in Abidjan was due to malfuntion of the aircraft warning system. I dont blame the pilots - however it seem that they were not experienced enough to know that the alarm was false. They also could not tell that the plane was losing altitude until it was too late - despite audible alerts.

Going forward, I'm not sure I would feel comfortable boarding a KQ jet in lousy weather.

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