KENYA AIRWAYS IS LOOKING FOR A LIFT

New chief executive has plans designed for business and wealthy leisure travellers following years of losses

When Sebastian Mikosz took over as chief executive of loss-making Kenya Airways last June, he immediately shut its outlet in Nairobi’s downmarket Accra Road, which served thousands of small traders who fly to the Far East to buy cheap goods in bulk.

The move marked the beginning of an aggressive hunt for cost savings and premium passengers, after years of losses following a slump in tourism and large debts incurred to buy new aircraft.

The Polish native, who helped turn around flag carrier LOT Polish Airlines as its chief executive, needs to stem those losses before the airline can begin to pay down $2 billion of debt restructured in November to stave off its collapse.

He says he plans to roll out a new economy-plus class by the end of the year, designed for business and wealthy leisure travellers, including growing numbers of American tourists and executives from dozens of US companies with offices in Nairobi.

Coming first to wide-bodied planes, it will mean new seats with the same capacity by using the space between them. “We are working on a pretty big reshape of the onboard experience,” Mr Mikosz says. The airline also plans a direct route to the Indian Ocean luxury tourism island of Mauritius and the first direct flight from Nairobi to New York by any airline from October, a plan Mr Mikosz says is known as the “$100 million project” for the revenue the daily flight is expected to bring in.

The US route will compete with indirect flights from established players such as British Airways and Ethiopian Airlines, and test Kenya Airways’s ability to reshape its image from that of an Africa-focused carrier.

“We still have to prove that we can produce an operating profit,” Mr Mikosz says in his office overlooking airport service hangers.

“That is the biggest challenge that we have in an environment where you have a lot of competition.”

Twenty five foreign airlines operate out of Nairobi’s main airport, including Turkish Airlines, which is expanding in Africa, South African Airways and Ethiopian.

Mr Mikosz describes this competition as his biggest fear as he tries to turn around a publicly listed firm owned 48.9 per cent by the government and 7.8 per cent by Air France/KLM and attract a strategic investor.

“It is really sometimes very frustrating when you see that somebody can have much lower costs thanks to this protected environment and you have to face a real free market economy,” he says.

His plans mark a shift from a focus on African air passenger demand, which the International Air Transport Association sees growing by almost 6 per cent a year over the next decade due to increasing economic output and poor road and rail links.

Kenya hosts regional hubs for 48 US businesses such as Google and IBM, and the United States is the fastest-growing source of tourists, many changing planes in Europe or the Arabian Gulf as part of trips more than 20 hours long.

And European firms are taking an interest too.

French companies plan to invest more than $10bn in 12 Kenyan projects spanning the manufacturing, energy, agriculture and technology industries, President Uhuru Kenyatta said last week.

About 60 executives from companies including Schneider Electric, Total, Urbasolar, Peugeot and Bollore visited Kenya in search of investment opportunities, the presidency said. It didn’t specify which of them would invest, nor the individual sums involved.

Mr Kenyatta, who was re-elected last year, is seeking to expand the $70bn East African economy with a so-called “Big Four” plan that involves boosting manufacturing to 20 per cent of GDP, enhancing food security, building half a million affordable housing units and providing universal health care within the next five years.

And the influx of foreign businesses should benefit Kenya Airways, says Jan Mohamed, chief executive of TPS Eastern Africa, which runs the Serena chain of luxury hotels and safari lodges.

Passengers, especially business travellers, would pay extra for direct flights, which take about 15 hours, he says.

A former executive at Kenya Airways, who helped return it to profitability after years of losses in the early 1990s, says the new strategy is sensible but holds some risks.

“The money is in the business part of the operation. The leisure side will give you volume but it gives you volume at low rates,” he says.

That is the biggest challenge that we have in an environment where you have a lot of competition SEBASTIAN MIKOSZ CEO Kenya Airways