Allan Kilavuka: My growth plan for KQ after corona

It has been a turbulent year for Kenya Airways as a result of the Covid-19 pandemic that affected the aviation industry worldwide. Early this month, the national carrier resumed international flights after five months of grounded service.

The Business Daily caught up with its chief executive Allan Kilavuka to get an overview of the business and what the company is doing to weather the coronavirus storm.

What are the prospects for Kenya Airways amid Covid-19 and post-pandemic?

It is good to point out that overall demand remains very low globally and the recovery is quite slow.

We are yet to see resumption of travel for the corporate segment and many of the countries especially in Africa are yet to open their airspaces or are still maintaining very restrictive travel conditions.

In the meantime, we are still going to operate at a reduced scale with an extremely lean network, and this will continue for the foreseeable future.

Which segments of the business have been hard hit by effects of the virus after KQ resumed flights last month?

We anticipated that our return to the skies would be gradual, as different destinations in our network continue to open at different times, and passenger demand and confidence grows over time.

We began by deploying about 25 percent of our network and we are reviewing this constantly and making necessary adjustments.

In the early days we saw, as expected, a demand upsurge due to pent-up demand which has progressively eased in the subsequent days.

The international load factor (the amount of passenger seats occupied) is currently at about 37 percent.

What about domestic travel, especially flights to Mombasa and Kisumu from Nairobi?

The domestic travel average load factor in our first week of operation was 56 percent, which dipped slightly to 49 percent. This has gradually risen to 59 percent in the last week.

Demand is picking up on our domestic flights and especially Mombasa. We have good load factors on the flights we are operating, and we will be upgrading flights on Friday and Sunday to operate the Boeing 737-800, which increases our capacity by about 50 percent more seats.

What plans are in place to ride out the crisis?

Our target is to reduce the company’s overall total fixed costs (not just staff costs) by about 50 percent in response to our revenue projections.

Therefore, we are reducing our network, our assets, and our people. The reduction will not be like for like, meaning that the shrinkage will not be uniform across the three areas.

The workers union reckon that job cuts are not justified. What’s your take?

The rightsizing process is not an easy one, and to be honest it is one that we would rather not be engaging in. However, it is necessary to ensure the sustainability of Kenya Airways.

We need to make the right decisions today for the sustainability of the business tomorrow, hence the decision to shrink now in order to grow in future and emerge on the other side of the crisis a leaner more efficient airline.

This allows us to reset the cost base now based on the level of projected demand and then strategise for gradual growth in the long-term.

Pilots have been more vocal over the cost cutting measures. How do they affect the KQ wage bill?

We have 414 pilots who form about 10 percent of the organisation, but account for 45 percent of the payroll cost.

Based on our three-year projection, we will require 50 percent to 60 percent of the pilots to efficiently support the reduced operations. However, we are trying as realistically as possible to reduce the impact to conserve as many jobs as possible across the organisation.

How many jobs has Kenya Airways shed following the coronavirus?

We began with voluntary staff actions where staff who opted to exit were given the opportunity to do so. The next phase impacted about 650 staff which was a mix of staff on probationary contracts who we unfortunately had to let go, and staff who were on expiring contracts which we were also not in a position to renew.

We are in the final phase, which is the redundancy exercise and is expected to affect about 590 staff.

Which routes have registered high demand of the 30 or so that you are flying?

Demand is picking up on our domestic flights and especially Mombasa. Within the region, the Juba route is doing well, and we will also be increasing capacity after assessing the trend on Fridays and Sundays.

The London route continues to perform well with our three weekly operations (Tuesday, Saturday, and Sunday). We have seen an uptake in demand driven by the reopening of schools in the UK.

Our one weekly operation to China is also performing well especially on the outbound leg as there is demand for returning Chinese who were not able to travel back since pandemic hit.

You have given an indication that KQ will resume flights to China in October. How many cities will the airline will fly to and the frequencies?

We resumed our flights to China and this was earlier than we had expected. The reason for this was an approval that we had sought was received earlier. We are currently operating one flight a week to Guangzhou which is the city we have been flying to previously. We will review the frequency based on passenger demand.

What plans are there in regard to resumption of flights to New York?

The flights to New York will begin on October 29. The Covid-19 pandemic has affected travel demand worldwide, it will be a gradual resumption starting with one weekly service.

As we are doing with all the other routes, we will monitor the trends and make the necessary adjustment to the frequency based on demand.