Kenya Airways will spend $3.6 billion over the next five years on new planes and routes, mainly to connect travellers between Africa and Asia, its chief executive said. Titus Naikuni said trade between Africa and China and India had soared in recent years, growing at an annual rate of about 200 percent, creating huge opportunities in the travel market.
"We are looking at African markets. We are looking at Asia, India and we need to connect these three land masses," Naikuni said on March 22.
Ranked as one of Africa's largest airlines, the carrier that is 26 percent held by Air France KLM, is undertaking a $250 million cash call that will go towards funding the plan. "I'm expecting that subscriptions will be 100 percent if not more. It is going to be a success," Naikuni said, saying that Air France KLM and the government, which holds a 23 percent stake, had agreed to take up their rights. "What we are looking for is about $125 million. We have been out in the market place and a number of foreign investors are very keen. That is what makes me very optimistic."
If the cash call is successful, Kenya Airways will get a boost to its debt equity ratio, which stands at around 1, allowing it to borrow a further $2.2 billion.
The balance of the required funds would be generated from internal resources, he said, giving the airline a chance to double its passenger fleet to 68 planes and add eight freighters. It operates a sole, leased freighter.
Extra aircraft would enable the carrier to start six new routes to China, six new routes to India, a service to Madrid as well as increase frequencies on its numerous African routes.
"We are starting Delhi in the next two months. In fact if I had aircraft I would put a double daily to Mumbai," he said.
Kenya Airways' strategy hinges on connecting Africa with the outside world through its Nairobi hub. It has opened a string of routes across Africa to tap a vast continent that lacks good road and rail networks.
The airline is expecting 10 E-190 Embraer jets due for delivery between July next year through to 2013. It also signed a deal for the purchase of 787-8 Dreamliner planes with Boeing in April last year. The main risk facing the firm's plan is the expansion of Nairobi's main airport, which although built in 1978 to handle 2.5 million passengers a year, manages 5 million.
"This airport must be expanded quickly. Let's break the ground quickly because if we continue talking, another year could go by," Naikuni said, adding that the new facility should have a capacity of 20 million passengers.
Kenya Airways expects to carry 4 million passengers in its 2012/13 (April-March) financial year, up from 3.7 million in the year ending this month, Naikuni said, thanks to the increased services it has been offering.
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