Loading
Recorded at CAPA Live October from Puerto Rico

CEO Interview with Kenya Airways, Group Managing Director & CEO, Allan Kilavuka

Kenya Airways is the national airline of Kenya. The carrier is based at Nairobi Jomo Kenyatta International Airport and operates an extensive network of regional services within Kenya and Africa as well as flights to Asia, the Middle East and Europe. Kenya Airways became a member of SkyTeam in 2007.

Kenya Airways and South African Airways (SAA) signed (28-Sep-2021) a memorandum of cooperation with a long term view to create a pan-African airline group. The proposed group is intended to "enhance mutual growth potential by taking advantage of strengths of the two airlines' busy hubs". The airlines aim to cooperate in areas including networks, fleets, capacity deployment, economic opportunities, technical areas and MRO to achieve economies of scale. The carriers will also collaborate on joint pandemic recovery strategies and cost containment.

Kenya Airways Group MD and CEO Allan Kilavuka stated: "The future of aviation and its long term sustenance is hinged on partnership and collaboration". He said the partnership "will enhance customer benefits by availing a larger combined passenger and cargo network, fostering the exchange of expertise, innovation, best practices, and adopting home grown organic solutions to technical and operational challenges". 

Hear directly from Mr Kilavuka on this and a range of other important topics in this exclusive interview.

Speakers:

  • CAPA - Centre for Aviation, EMEA Content Editor, Richard Maslen
  • Kenya Airways, Group Managing Director & CEO, Allan Kilavuka

CAPA Live is the most sought-after monthly global aviation event. Taking place on the second Wednesday of each month, thousands of industry colleagues from across the globe tune in for their monthly dose of aviation and travel news, analysis, and in-depth interviews with industry leaders. Register here to be part of our growing community.

Transcript

Richard Maslen: 

The 25 Minute. Give me the five-minute warning and one-minute warning. 

Speaker 2: 

Yep, I will give you a five-minute warning in the chat box. Okay, cool. All right. I should put myself on mute and leave you to it and speak to at the end. Thanks. 

Richard Maslen: 

Hello, I'm Richard Maslen. And I'm delighted to welcome you to the latest CEO interview for the October 2021 edition of CAPA Live. In Africa, we often hear of the Big Five, a term coined initially by game hunters, but now regularly used by safari tour operators. When it comes to airlines Kenya Airways has been a member of that of Africa's Big Five for a long time, may be sat at the top of the tree for a long time during its history. 

Richard Maslen: 

The aviation world is ever changing even in Africa. There's been some clear winners and losers in this emerging market. But Kenya Airways is practising it retreating into the shadows the fast expanding fellow East African carrier Ethiopian Airlines. Has COVID now complicated the environment further or has it provided the perfect platform for the former great South African aviation to re-emerge stronger and perhaps even working more in cooperation? I'm pleased to welcome Kenya Airways, Group Managing Director and CEO, Allan Kilavuka, to CAPA Live. Thank you for joining us today. 

Allan Kilavuka: 

Thank you, Richard. And it's a pleasure being here. 

Richard Maslen: 

Brilliant. Obviously, we can't start any discussion without what has been affecting us for the last 18 months. COVID has changed everything that we do in our daily lives. It's has changed everything in aviation. We know a lot about what's happening locally to us, but perhaps a lot of the people viewing this won't be aware of how Kenya has been affected and how the situation is now. So can you just briefly give us a little overview of where Kenya currently is in terms of the pandemic? 

Allan Kilavuka: 

Yeah, thank you, Richard. And thank you for inviting me into this discussion. So COVID-19 has been quite devastating. It has had quite a devastating effect on Kenya as a country and Kenya Airways as an airline. We were grounded for quite a long time for proximately, six months last year. And intermittently, also had some grounding this year as well, locally, and also had a lot of restriction into Europe in particular and some other countries as well. As you know, we are a network carrier as Kenya Airways, so we carry people from principally across Africa, into Asia, and Europe, and also the US. 

Allan Kilavuka: 

And because of the cessation of movement, because of the restrictions, we are pretty much around about 55% of our capacity right now. And likely, it's actually ever increasing every day, which is a good news, as countries continue to open up. There was also a window of hope when we started vaccinating so that helps as well, although the vaccination rates are very low in Kenya. So that's kind of what is happening. 

Allan Kilavuka: 

And what is pleasing, what I can see is happening now as well is that the positivity rates, this COVID positivity rates across Africa, and in particular, Kenya, have dropped significantly over the last few weeks, which is very encouraging. I can see there's a creep up of flying activity, particularly locally and regionally, so that help us in our recovery process. So that's where we are. But it's an everyday, every week monitoring, because things change so rapidly in this industry. 

Richard Maslen: 

That's [inaudible 00:03:33] really encouraging that things are beginning to move in the right direction. I think as an industry, we are seeing that, and that's what we need, and hopefully that will continue. Obviously, we're not aware of what's going to be around the corner, unfortunately, and how we could be impacted again. But obviously, you've had to adapt quite a lot your operation being grounded for a long period of time. As you've relaunched operations, the marketplace is very different. Obviously, you said about restrictions in lots of countries where you've been unable to serve, and how has that changed, how you look on the day-to-day running of the airline? Obviously, it's a lot more complexity for you. 

Allan Kilavuka: 

Yeah. So, Richard, a couple of things. The first one being that we had to significantly scale down our operations. I mentioned earlier that we are operating about 55% of our capacity. In fact, at one point, we were operating 38% of our capacity. So we are up to about 55%, creeping up slowly every day. So, obviously because of that we have had to adopt shrunk-down operation and hoping to grow from there. 

Allan Kilavuka: 

Because of that we've also initiated lots of activities, initiatives that are driving us towards innovation, and really getting to understand what new ideas will help to propel the airline in different directions. So for example we have set up a hub, we're calling it Fahari Innovation Hub, which is possibly Africa's only data-driven airline innovation hub in Africa. So we're very proud of that. Also, repurposing some of our passenger aircraft, particularly the widebodies, so that they can carry more capacity. So you increase the capacity of the Dreamliners for instance, to carry quite a lot of cargo. It can carry about 50 tonnes now, into the Far East and into Europe as well. 

Allan Kilavuka: 

And again, this Dreamliner conversion or repurposing was again, the first airline... we were the first and I believe the only airline who have done the repurposing of Dreamliner to carry cargo. So those kinds of things... And because things change very quickly, we are also trying to be very entrepreneurial in the way we approach things very flexible, very agile, so that we can keep up with the changes that are going on. 

Allan Kilavuka: 

Maybe later on, I can also talk about the customer. But that's also critical and important. One of the other things that we have put in the front and centre and again, I'll talk a little bit about this again, maybe later on, is about partnerships and cooperation. In this new world, we have discovered that it's not all about competing. It's actually a lot more about how do we partner to make us more efficient, and to make our partners also more efficient, to reduce unit costs, to give customers a wider range of choice, and so on, and so forth. So those kinds of things, focusing on cargo, focusing on partnerships, looking at innovation, focusing on our customers are the new kinds of ways of doing things in Kenya Airways. 

Richard Maslen: 

Okay. I'd like to [inaudible 00:06:48] when you say about partnerships. Now, obviously Kenya Airways, as I said in the introduction South African Airways, were two of the strongest airlines in Africa for a long, long time, but they've been affected quite a lot in time. There's been lots going on in terms of the management in terms of the operation of them. And a lot of rivals have emerged in the market perhaps stronger now. South African Airways has taken COVID time to reorganise to rise again as the national carrier South Africa. Now I understand that Kenya Airways and South African Airways will now be working in some form of partnership now moving forward. 

Allan Kilavuka: 

That's correct. Richard, what we have discovered is... There's a Chinese or sometimes people say, African saying that says, if you want to go far, you need to walk together with someone else, if you want to go quickly, you walk alone. So we want to go far, this pandemic is going to be with us or the effects of it are going to be with us for quite a long time to come. In addition, it only makes sense for us to partner with other African carriers or other carriers, let's say that way, and don't just carriers other partners. So we've had discussions... we've been having a long-term discussions with South African. And we think that they are an excellent partner for us. 

Allan Kilavuka: 

South Africa is a very strong brand and so are we. And we believe that being apart, we fragment market a lot more, but being together and cooperating, we consolidate the market. The benefit of the customers to begin with, the benefit of two airlines and the economy in Africa as well. So we have signed the memorandum of cooperation with South African to see what we can do quickly. But the long-term objective of this partnership is to form a pan-African airline that should be able to compete with other large carriers as well. 

Richard Maslen: 

Now, obviously, a pan-African approach is very important. African connectivity remains quite poor. [inaudible 00:08:55] intra-Africa flights. It's very difficult to get from one side of Africa to another. So developing a pan-African network is very important. How do you see that developing further? Obviously, you have a lot in East Africa, with South African Airways, you'll cover a lot of Southern Africa, how will you cover the other areas of the continent? 

Allan Kilavuka: 

Yeah, so the cooperation that we have or this partnership that we've started up with South African Airways is the first of many. We had an earlier partnership with Congo Airways, which is in Central Africa, very similar, but slightly different objective. And the partnership with Congo Airways is to mutually support each other because Congo Airways have a lot of domestic market and they don't have necessarily the equipment. So we're trying to help them in that regard. Support them in terms of giving them equipment and [inaudible 00:09:54] to support them fulfil their local demands. And then mutually cooperate so that we can, like you said, connect the Central to the East, and also Central to the West and then Central to the South. So that is with Congo Airways. With South African, we want to see how we can cover the African continent very effectively. 

Allan Kilavuka: 

And again we're open to have other joiners, because this is not an exclusive club. We'll have other people join us to continue with this ambition to consolidate the aviation space in Africa. This is going to be, in my opinion, one of the most fundamental developments in African aviation for a long time to come. If we do it successfully, I think it will change the face of aviation. It will help us grow. It will help reduce unit costs. It will help our efficiencies. It will help connectivity and so on and so forth. So on top of the fact that it will support the economy, and the socio-economic aspects, including political integration and so on, it can only be good news if we do this successfully. So we are very bullish about this. We're very excited about this prospect. But again, like I said, it's not an exclusive club. It's one that we think we can start up, and we'll see whether other people would want to join. 

Richard Maslen: 

So that brings us nicely to that that horrible L word in Africa, liberalisation. It's been talked about for so long. There's been very little progress. That SATAM seems to begin to be making progress ahead of the COVID pandemic. What's your views on the actual pathway to liberalisation in African? Will we ever get there? We've been talking about it for decades, [inaudible 00:11:38] we get to that stage? 

Allan Kilavuka: 

Yeah. And Richard, I think SATAM is not the only thing that we have been talking for details about. And there was a talk about political integration, for instance, which never happened. There's a new one, which hopefully will move faster than SATAM, which is Africa Continental Free Trade area. So there is many initiatives in Africa, which are well-meaning, but they move very, very slowly. Africa is a very complicated market. It's very fragmented in language, culture, size and everything in between. So I think that makes it a lot more complicated. So, I guess that's one of the challenges that we see here, individual ambitions of various countries and jurisdictions. 

Allan Kilavuka: 

But having said that, I think that SATAM needs a lot of political will. And it needs, I would call them sponsors to drive the whole initiative. Right now, it doesn't have one, I wouldn't think so. And as well, I believe that our intended purpose of consolidating aviation in Africa will help perpetuate the ideals of SATAM. I think that SATAM, first of all, is a good idea. I mean, I think very few people would argue against it. 

Allan Kilavuka: 

The challenge, though is, African aviation is unique. And for it to move, first you need to be very clear what the rules of engagement are, the roadmap, implementation, milestones, and so on, and so forth. That way, then people can see the picture. Right now, it's a good concept, but absolutely, very unclear in terms of roadmap and implementation. So I think that needs to be laid out, needs to be a proper political sponsorship, so that it can be successfully achieved. 

Richard Maslen: 

Okay. I would like to look a little bit more at the Kenyan market and the dynamics of the market. You've obviously mentioned about how you're adopting technology, which is quite a key step forward. But before we go into that, perhaps you can just give us a little overview of the Kenyan market, its key dynamics. And maybe what's changed that you say demand is beginning to grow again? Are you seeing any changes now in the post-pandemic world to what you saw before COVID? 

Allan Kilavuka: 

Yeah. I think that... First of all, when you say, Kenyan market, it's actually quite a small market aviation. Because Kenya is a country, relatively speaking, is a small country, relatively speaking. I know it's larger than the UK and many European countries, but it's relatively small country. So from an aviation standpoint, it's not really huge. I mean, I'll give you an example. For example, 15% of our operations are local, are domestic. So if you want to think about maybe Kenyan market, I would think more East African market, which includes Uganda and Tanzania, maybe Rwanda, and now maybe DRC, which is now coming in and maybe South Sudan. So that's what I would consider a more scalable market. 

Allan Kilavuka: 

So, but talking specifically about the Kenyan market, because we have a few frequencies. We have about six frequencies, ourselves together with our subsidiary company. And now we think we're probably about between 70% and 75%, of 2019 level, which is actually pretty good, considering that our vaccination rates are very low compared to the Western world. And still, people are economically struggling because of the effects of pandemic. So I think 70%, 75% is a good thing. However, we still don't see a lot of business traffic, which I guess is not surprising. 

Allan Kilavuka: 

But people, again, are calling for more. People are more particular about product hygiene, as you would expect. People are excited when they see some of our innovation with regards to touchless technology. People are also happy because when they see that we understand them a little bit more. So I think the big game changer for us is the customers, customers demanding things differently. And expecting products in light of the new realities, like I said about, mainly hygiene, and preferring more point-to-point, for example, and so on. So, we now part need to be very quick to respond to what they're asking for, because their responses are needed very quickly. 

Allan Kilavuka: 

And so for us, what technology will do in this particular case is mainly two things. It's going to do many things, but I would focus on two main things. One, it will help us get the data that we need, so that we can get a better understanding of what our passengers or customers are looking for. And be able to respond effectively. 

Allan Kilavuka: 

Secondly, it will help us to move faster, and it will be easier to use. So if you use, for example, a touchless technology it's much easier to use. Recently, we implemented a cashless options in our hub, here at Nairobi. And it was very exciting. I mean, we're very excited about it, although some people are still a bit cagey about it. So those are the kinds of things that we are seeing going forward. The traveller of the future, of course, is going to be looking for experiences that will make his life easier, safer, faster. So this is what we obviously need to respond to as well. 

Richard Maslen: 

And I'd just like to look at a couple of aspects of the operation. You've mentioned about your low cost operation with Jambojet. Now obviously, a lot of people talk about low-cost carriers don't really fit quite well in when they are sort of sister to a full service carrier. And a standalone low-cost carrier is better positioned to take advantage of the market. But that arguments turned on its head now I think with COVID that being able to have both when the marketplace is, you see in low-cost grow a little bit quicker and regional flying a little bit quicker than long-haul when obviously if you said business travel. How does the future growth of the Kenya Airways group work with the two brands of Kenya Airways and Jambojet? 

Allan Kilavuka: 

Yeah. And this is a question people ask me. People ask me the question is, why are you competing with your subsidiary? Because certain routes we fly together. For example, we fly to Mombasa, both of us, and we have very high frequencies both of us. We fly to Kisumu, again, both of us. We used to fly to Entebbe, used to fly to Kigali, and so on and so forth. So the question is, why do we compete? And this is actually answering your question is that... And indeed sometimes we do compete, so there's overlap of customers, and that's perfectly okay. But when you segment the market, you can clearly see certain aspects of the market who don't necessarily fit in one or the other. For example, our locals carrier does not have business class, doesn't have premium travel.They have only one class. So there are certain groups of travellers who are insisting on travelling on business class, and they can only find that within the Kenya Airways fleet. So I mean, that's a good example. 

Allan Kilavuka: 

And most of the way we position Jambojet; it's a younger, fun loving airline, less formal sort of thing. And so you find that it attracts that clientele. Obviously, also, because of the equipment that they fly, they can fly into a lot more airports, a lot more local airports than we can. And so if you look at the market that we serve, for example, in some of the markets, just because both of us are flying and we're serving different markets, we can cover upwards of 70% of the market. In fact, in some cases 80%. So it's complementing our group strategy. 

Allan Kilavuka: 

And most of what they do is point-to-point. So again, they feed into our network, and also we feed into theirs. And so it's very complimentary. I mean, again, like I said, of course in some instances there's an overlap, but that's fine. That's fine. In fact it's good competition within the family. 

Richard Maslen: 

That's good to hear. [inaudible 00:20:22], sometimes competing with yourself is better for both businesses too. So I'd just like to talk a bit more about the cargo size. You mentioned about the the changes to the 787, and how you building up on the cargo, how cargo's become perhaps even more important now to airlines. For a long time, it was just a further aspect of the operation. But now cargo has taken on a higher priority especially in Africa. So perhaps you can give us a little overview of how you've made these changes on the 787, and what you see going forward in terms of cargo's mix in making future perhaps network decisions, and looking at future developments? 

Allan Kilavuka: 

Thank you, Richard. So for cargo, we currently we have two dedicated freighters, which were doing short-haul into Africa. And we were using a lot of the belly capacity for long-haul flights. Of course, when that came to an end, we had to think very quickly. And initially what we did is, we just basically turned our passenger aircraft, the Dreamliners, into cargo aircraft. And for some time, for about six or so months, that was working okay. Because we were using our seats, we would load cargo on the seats, light cargo, of course. But then we needed more room, more capacity. So we decided to remove all the seats to create more capacity on the cabin. And that gave us about 20% more capacity in terms of volume and space. We did that for two of our aircraft. They are very, very popular with our customers. So dedicated to cargo those two. Like I said, this is as far as I know, the only two Dreamliners which have been repurposed fully for cargo. 

Allan Kilavuka: 

Now, obviously Dreamliners at this stage would not be the ideal for cargo because the ownership cost is higher, because these are fairly young fleet. But again, they would sit idle, so you have to choose. And there's a lot of cargo capacity to use, so that's the choice we made. Now, from a futuristic perspective, what we see is that these two Dreamliners, they are doing a fantastic job creating a lot of traffic for us, because they are dependable, and they do long-haul. And so they create a lot of traffic. And then as we plan to now get in the freighters within the next two years or so. So then at that point, we hope that passenger traffic will have returned so we can reconvert our Dreamliners back to passenger, and then replace them with the long-haul freighters. At the same time, at the end of this year, we also getting an additional two freighters for short-haul flights that are going to support our existing fleet. We think that we will... not we think, we will definitely double our capacity by just doing that. 

Allan Kilavuka: 

Now, currently cargo is about 10% of our business. I'm using 2019 numbers, because 2020 was is kind of convoluted. So but then we want to move that from 10% to at least 20%, by end of next year. And that's very good. So there's a lot of cargo, outbound of Africa, Nairobi, Johannesburg, Kinshasa, and so on and so forth. But then we struggle a little bit with inbound traffic. So the challenge is to build the inbound so southbound into Nairobi, and to other African countries, and then distribute them. But then, of course, the silver lining is that you have the vaccines, for example, we're distributing across Africa. And it's not just going to be the COVID vaccines, it's going to be provaccines for everything. 

Allan Kilavuka: 

I mean, I was excited yesterday, the vaccine for malaria was sanctioned. So that's going to be a big one for us. And in addition to the fact that we have now a cold chain. Again, the only airline that has a cold chain within our facility here in the hub. So again, very excited to be part of that initiative. 

Richard Maslen: 

Okay. Going back to... we mentioned about governments and liberalisation the marketplace in Africa. Government intervention is quite strong in aviation. It's been particularly strong in many nations across Africa. And governments will continue to take a very active involvement in the sector moving forward, that's quite clear. But how can you work as an airline CEO, to ensure that this is for the good of what you're trying to achieve for the airline and for the country, rather than just so for the government's needs? 

Allan Kilavuka: 

Yeah. Richard, there is indeed a thin line because governments on the one hand... They mean well, but they're not experts in running airlines. So what you want them to do is to be interested from a policy perspective to make it easier for us to operate, but stay out of the business of running the airline, because they're not experts in the airline industry. So that's really the conundrum. How do you get them to be involved and yet not involved in running the business? 

Allan Kilavuka: 

And if you can demo... So for us is to really demonstrate what is, specifically, needed from a policy perspective, funding and so on. And then if we get that from them, then we demonstrate our abilities to run the airline efficiently, because that's their demand. If you run the airline efficiently, then they will not intervene. The problem is, if when they think that the airline is not being run the way it should, and they would like to intervene. So I think for us is just to continue engaging government. They're very, very important partner, and not just our government, but governments around the world, very important partner. Because without them, obviously, it's going to be very difficult for us to operate. 

Richard Maslen: 

Okay, we're coming to the end of our time, which is flown past today, I have to say. It's been really a pleasure talking to you, Allan. I'm going to give you the most difficult question there is now, I'm sorry about this, but crystal ball in your hand, how do you see development taking place over the next couple of years? When do you think we will start to return to pre-COVID travel levels and return to growth? How will the industry look? What will be different about it in the future that wasn't there before? And perhaps, particularly, pertinent to Africa is, will there be more of a reliance on local airlines in Africa? Or as has been the case will it be more pushing towards [inaudible 00:27:19] with the Gulf carriers coming in and serving the African markets? So there's a few little bits there, you pick up how you'd like to do [inaudible 00:27:27] that. 

Allan Kilavuka: 

Yeah, very, very important and very good question. And it's anybody's guess, like you said, crystal ball, IATA says three years. I mean, some people say four years, and so on, and so forth. Now, IATA and other... probably realistic... But over the last few weeks, I have been drawn to the more optimistic side of this expectation. From what I've been seeing... I attended the IATA AGM in Boston, and I saw the hype of my colleagues in the other airlines. And just also the sentiment that I hear people really, really are yearning to travel. And in addition to the fact that the vaccines are coming through and so on, people are more aware. I think that there's going to be a more faster recovery and surprise recovery. And I wouldn't have said this a few weeks ago. So it's new for me to say that I think it's going to be a 2023 recovery is what I think, and maybe hope more than think. 

Allan Kilavuka: 

So, but unfortunately, I think Africa is probably going to lag behind a little bit. And also not much because the vaccination, but mainly because of the impact of COVID on their economies and the ability for people to travel. But nonetheless, I think it is still a 2023 recovery is what I think and hope. And it's going to surprise people because I think there's a lot of humming, people really wanting to do something different. 

Allan Kilavuka: 

Now, when travel starts, what's going to be different, first of all, airlines who don't focus on their customers will really suffer, because customers will have choices, or we want to have choices. Of course, customers will also prefer point-to-point without necessarily connecting. So as much as possible, they would prefer that. So we also need to respond, how do we get that to them as much as we can? In some cases, not very easy, but how do we craft a product that will be helpful for them. And also customers we will be looking at hygiene, for example. In fact, what I've seen, I've seen a lot of questions, comments from customers directing to me regarding either complimenting me on fantastic hygiene standards on the aircraft or questioning me on what we should do differently. It's all very welcome. So I think we'll see a lot more of that. 

Allan Kilavuka: 

I also believe that you'll see a lot more consolidation or let's say, partnerships, including consolidation, including cooperation, co-chairs, whatever the case may be, mergers, because they will be important, because the airline needs to be a lot more consolidated. I've said this many times and maybe during this interview, because I truly believe this. And particularly in Africa, I mean, if we continue the way we are fragmented, I think we will be in a lot of trouble. 

Allan Kilavuka: 

So it's incumbent upon us for our own benefit to see how we can work together much better, and make the airlines a lot more viable, give a lot more choice to our customers, improve our products and our efficiencies, reduce our unit costs, increase our revenue streams, and so on. And we can only do that if we work closer together and collaborate and make the airlines more scalable, so that we can overall reduce the costs that we are incurring. So I think you'll see a lot of that and you'll see a lot of technology, digitalization, agility among airlines. Of course, you'll see a few new products on health and safety. 

Allan Kilavuka: 

And I talked about point-to-point, you will see a lot of that. So we need SATAM, because we need a lot more [inaudible 00:31:19] freedom. People want to travel from one destination to another. Sometimes even to secondary destinations, without necessarily going through the primary destination. So I think it's exciting. But airlines, which respond quickly to this kind of new changes are the ones that are going to survive and thrive. The ones that lag behind, unfortunately, will have a very difficult in this new time. 

Richard Maslen: 

Well, thank you very much, Allan, really appreciate your views on the marketplace at the moment. And to hear the encouraging positivity about trade beginning to develop. It's always good we have these forecasts, but it's always good to actually hear from airline CEOs actually telling us that there are people on planes. That the marketplace is beginning to show some signs of improvement. So that's really encouraging. So it's been an absolute pleasure talking to you. 

Allan Kilavuka: 

Thank you. Very good talking to you as well, Richard. Thank you very much. 

Richard Maslen: 

Right. Cheers. Thanks a lot for the... 

Want More News Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More