Former Kenya Airways, Group MD & CEO, Allan Kilavuka at the CAPA Airline Leader Summit World 2025

Transcript

Allan Kilavuka:Currently at Kenya Airways, majority shareholder or the biggest shareholder is the government of Kenya, which owns about 49%. The second largest is, we call them KQ lenders or lenders, local banks, which own 38%. And then the 3rd largest one is KLM, which owns around about 7%. Now, in future, what we want to do is we want to increase the shareholding. We want to increase the shares. And the purpose of that is to capitalize the business. In other words, to inject more capital into the business for purposes of growth. Because we are thinking of expanding the fleet, doubling the fleet in the next 5 years. We also want to diversify the business a lot more, so invest more in our maintenance organization, in our academy, and our hospitality business as well. For the last 1 year, we've been shopping around for a suitable strategic investor who will inject more capital. And of course, in that process, it will dilute the existing shareholding of the existing shareholders. They do have about 7% of shares, KLM. We have asked them if they will be interested in expanding it. They said for now they will not be interested in expanding it. So we are looking for other shareholders. So initially, at the very onset, KLM entered the shareholding of Kenya Airways at about 25%, the initial public offering. And that was diluted in 2017 to its current 7% because they did not put in money for the rights issue. Now, between 2017 and 2018, we also terminated a joint business we had on the Amsterdam route, which of course diluted the cooperation and relationship that we had, a very strong relationship, from being a joint business to just simply being a codeshare arrangement, which we currently have. So now we are purely a codeshare arrangement, but what helps us is we are under the umbrella of SkyTeam, So we cooperate and work together as members of SkyTeam and not necessarily as them being partly shareholders of Kenya Airways. It's a very small market, and because it's small, the more reason why it should be more consolidated so that it has more economies of scale. But it's the most fragmented market in the world. In fact, if you look at the number of commercial airlines in Africa, Africa has the largest number of commercial airlines. Most of them are not viable. Most of them are too small. And so the idea should be to consolidate this aviation market, particularly the airlines, a lot more and to work better in the ecosystem. So the project or the initiative that we are pushing on as African Airline Association is to see how airlines can work better together. It's a very large continent. It's very poorly connected so that we can not just make the airlines individually more viable, but also connect the continent a lot better because we only have 16% connectivity. So how do we move the 16% to something more respectable like 50%, which is connectivity in Asia, or 60+% in Europe? The best way to do it is to work better together. and to see how we can synergize our working relationship. It's easier said than done because remember, these are individual airlines with sovereign states with different ambitions and so on. So it's a lot of hard work that is needed to be done, but it's necessary hard work that should be done. 33% of our fleet has been grounded since the beginning of this year. Now, the I guess the tragedy of our fleet was that we bought the aircraft all at the same time, most of them at least, which means all of them need to go to the shop at the same time. Now, because of lack of slots, because of lack of spare parts, because of everybody wanting to go to shop and so on, we've had a difficult time to getting these engines out because remember, they are all of them need to go to shop at some point. So when one aircraft gets back the engines, the other one needs to go back to shop and so on. So that has been quite difficult for us. We were hoping that by now we will reduce that from 33% to 20%. Unfortunately, we still are 33% down on our widebody. We also have some narrowbodies which are same manufacturer or same OEM, which are still not fixed. And so this year has been a tough year. We've not been able to fulfill our entire network as we should have. The plan for next year is that we will at least have reduced the 33% to 15% by half of next year. We're also inducting new aircraft in the first half of the year and actually in the second half of the year as well, which will help to improve availability of our network. So the big one is Actually, the biggest over and above the fleet challenge is capitalization, like I mentioned earlier. We have been at this for quite some time. The airline needs capitalization. It needed capitalization in 2024. So we're one year late. There's been delay in getting that done. So we are working hard to make sure that we conclude on that process, which has already begun, get the investment roadshows on the way. And then eventually close it by first quarter of next year and then make an announcement hopefully by mid of next year. So the beauty about— first of all, it's a very strong brand with extremely highly qualified people. I mean, the skills in Kenya Airways are— I mean, we can do, for example, maintenance of the Dreamliner from A to D check. The only thing we don't do is we don't do the engine overhauls in the country because we don't have the shop. But we have engineers to do the entire checks. So we do it for not just for Kenya Airways, but for any other airline. And we have instructors and so on and so forth. Our pilots are probably one of the better pilots in the world. So I'm talking about the ingredient of very highly skilled staff, very strong brand in Africa, which has been there for a long time, for close to 50 years. And then we have a market that is growing and that has huge potential. So for us, we see ourselves as a gateway to this huge potential that we need to explore and exploit. What is needed is capital to make sure that we are making this potential come to life. Thank you, Allan Kilavuka, for joining us.

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