An Airline CEO’s Strategy for Making African Avia on Sustainable

An Airline CEO’s Strategy for Making African Aviation Sustainable

By Quartz Africa

AFRICA’S AVIATION INDUSTRY is highly fragmented. The continent has hundreds of independent airlines, many of which are unprofi table and on the brink of collapse as they struggle to compete eff ectively with big global carriers.

Further, the aviation business has been hit hard by the covid-19 pandemic.

But airlines are trying to innovate and looking to consolidate to make the businesses sustainable.

In September, Kenya Airways and South African Airways, two fl ag carrier airlines, entered an agreement to create a pan-African airline group.

And earlier this year, Kenya Airways launched Fahari Aviation, a division to enhance innovation research, and development of unmanned aviation systems (UAS), including drones.

Quartz spoke with Allan Kilavuka, the CEO of Kenya Airways, on innovation, consolidation of African airlines, the African Continental Free Trade Area, and the eff ects of the pandemic on the airline.

Kilavuka, a former General Electric executive, has headed the airline since Jan. 2020.

The conversation has been edited for clarity.

How has the covid-19 pandemic helped or hurt business?

The effects of the pandemic started in earnest around March of 2020. We rely primarily on air traffi c, and air traffi c came down substantially. Currently about 80% of our businesses is passenger business, and in April 2020 most places—in fact possibly the whole world shut down—for a period of depending on each country between four to six months.

If you don’t fl y for a single day, you lose close to a million dollars.

Now in aviation if you don’t fl y—I mean in our case for example—if you don’t fl y for a single day, you lose close to a million dollars. You can imagine do d llars Youcan ima i gine six months it’s quite substantial. We were really hard hit.

Then we had to start building up again after reopening towards the end of last year. We fi rst had to convince the passengers it’s safe to fl y or safer to fl y. Secondly the economic situation and the resources of people who needed to fl y had been signifi cantly depleted. We had a situation where corporations had cut budgets. We had our premium customers who were the business customers not fl ying, and we still had restrictions.

Even up to now we still have restrictions in some countries. It’s been a long and painful recovery process. We’re not there yet, it’s going to take some time. But every day is better than the previous day, because more and more people feel more confi dent to fl y.

Now the fl ip side to this is cargo business, which was about 10% of our business. For that one it was the opposite, where there was cargo needed for emergency support for PPEs to support the pandemic, vaccines – just goods and services.

Right now there’s a problem because we have a backlog on the supply chain of goods and services particularly to and from Asia. You have heard of shortages of goods particularly electronic goods. There’s no capacity to move enough goods across the world. This is kind of a good problem for us because the problem is capacity.

Then we have the eff ect on employees – we reduced payouts and employees’ salaries have not been so good. What we try to do is to limit the number of exits from our staff so as to keep as many people as possible employed. And for the people we had temporality let go we have to make sure they are in our radar, so that if and when we need them we call recall them.

Has the pandemic changed the company culture?

It has changed the way we approach business. Many of our people are still working from home. We have a lot more fl exi hours and fl exi working conditions. In addition digital literacy has gone up. We have also increased our digital capabilities – not just our employees but also to our customers. They can access us a lot more easier using online tools.

The other thing that has changed is agility, because the pandemic changed things very quickly. The rules are diff erent in diff erent countries and they are changing every day. So you have to be agile, and move along with the changes that are happening. And also, because this is unprecedented, you cannot rely on past experiences to make some of the moves that you’re making. So you have to be creative, innovative, in order to come up with solutions for the customers.

Speaking of innovation, how do you envision your new division, Fahari Aviation, enhancing innovation, research and development in the UAS space?

This is a very exciting project for us. First what’s a cutting-edge technology in aviation? It will have to be UAS technology – that would have to be what it is. Because very soon we’ll have pilotless aircrafts fl ying, just as there are driverless cars. Right now technology is so good that pilots, when they use autopilot, can just sit and watch and make sure that their aircraft is going in the right direction. The aircraft can virtually take off , fl y and land on autopilot. So we are not too far from pilotless aircrafts.

We have become a more agile organization, over the last one and a half years, and so, we have to be at the front and center of every new emerging technology and we want to be in the conversation of how we introduce that UAS technology in this country. This is why we set up Fahari and we have a lot of experience in aviation. We are one of the most experienced aviators in this country and in this continent.

We used that manned aircraft experience and translated it into an unmanned aircraft experience. We want to provide effi cient and cheaper solutions to some of the problems that we see in the country. For example, there’s a lot of need for aerial inspection, surveillance. Even aerial spraying of crops. Right now we’re in discussions with some organizations to see how we can help farmers to do that.

As an example, we can provide local solutions to the locust menace. In the past, when you see a problem, people used to send helicopters – in fact they still do even now. We can provide a solution for that. Just to give you a typical example, so we were partly involved in the wildlife census that took place, that KWS (Kenya Wildlife Service) was doing a few months ago, and we were given a section of it.

So that’s the kind of thing that we want to roll out, helping those kinds of initiatives, so have discussions for example with the forestry department or can we help do the census for aff orestation in Kenya? Talk to state co-operations that have a lot of utilities—Kengen, Kenya Power and Lighting, Kenya Railways, Kenya pipeline—to help them do their inspections and surveillance on their installations, instead of using very expensive helicopters.

Of course many people are doing this, but the diff erence that we bring to the table is our experience and our ability to monitor safety. Because there can be a lot of rogue operators – that’s one of the things that people need to be aware of. And we want to make sure that this space is safe and we have been involved in a lot of safety enforcement when it comes to manned aircrafts and we can translate that to unmanned aircrafts.

The future of aviation, not just in Africa, globally, is when you consolidate

Many African airlines, including Kenya airways, have been unprofi table for years. In September, you announced an agreement with South African Airways with a long-term view to create a pan-African airline. Is the future of aviation in the continent strategic and collaborative partnership that focuses on

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consolidation?

Yes, the future of aviation, not just in Africa, globally, is when you consolidate.

Because aviation is a very expensive venture, with very low margins. You need to create economies of scale, so that your unit costs, drop. But more importantly, you also want to make sure that you are creating a network that gives your customers or passengers many options. That way, then you attract a lot more people to the group. That’s what happens when you consolidate.

You look at your customers and you see, what kind of solutions can you provide to your customers, by giving them a variety of options, and also by accessing destinations that you’re not able to access if you did it alone.

So for example with South African Airways, when it comes to fruition and we get to the point where we want to get to, which is to co-create a large pan-African airline group, you will fi nd that if we have close to 50 destinations that we fl y to and they have 50 destinations they fl y to, if you merge them together you’ll have close to a hundred destination for our customers. Not only that, they have diff erent routes to get to those destinations, so they can choose to fl y through their hub in Nairobi, they can choose to fl y through their hub in Johannesburg.

Secondly, because you now have a larger asset pool, you can then reduce your maintenance costs, you can reduce your purchase cost of equipment, because of the economies of scale. And then you have an opportunity to share expertise, between two diff erent organizations, and to build each other up, and also you have checks and balances of maintaining standards and safety because that is key, and critical.

You have to think about this in the global context because we’re not an island. Africa from an aviation standpoint is quite small. But if you look at the larger aviation market, African aviation is completely fragmented with hundreds of airlines – small ones, most of them unbuyable, and most of them unfortunately at the risk of collapse.

What happens in Europe and in the US and the western world and even in Asia is they look at the market and see how they can work together, especially in a crisis. They consolidate their assets, so that they become more viable with more assets to share across the groups – and that’s what has happened.

If you look at the US, they have I think four major airlines that operate in the US. In Europe, they also have maybe three major airlines that operate and dominate those markets. And yet, they are almost close to 10 times our market here from a seats perspective. So if they can do it, it means that they have a cheaper way of operating and they have a bigger bargaining power and so we need to do the same as well here. It’s a strategic play.

What challenges do you foresee in the consolidation process?

There are so many. You have to overcome obstacles around skepticism from people who have said this has been tried before and failed. We have to cross jurisdictions – remember in the case of South African Airways and Kenya, these are two diff erent jurisdictions, there are antitrust laws that we have to make sure we abide by and uncompetitive behavior.

Of course there are going to be people who will not wish us well and try to stop this both in and outside the country. There’s many obstacles, but that is why we are leaders, to see how to overcome those obstacles and make this work. It’s going to be a very very rough ride, but, we are committed to make it work.

How is Kenya Airways positioning itself to play a role in the African Continental Free Trade Area?

We are very excited about this, this is actually why we exist as Kenya Airways. Cause our main mission is to support the sustainable development of Africa. So this is part and parcel of it. In fact the consolidation aspects of the airline is exactly to support this. People need to move freely.

e t e e e –s e k s e y

So we need to interconnect Africa as much as possible so they can trade. In addition, we are ramping up our cargo unit. By the end of this month, we’ll have an additional 120 tons of space that will be fl ying daily. We increased it by 150 tons between last year and this year. We are slowly ramping up the cargo capacity to support Africa continental free trade area and also to support our customers to fl y from place to place.

The other thing as well is to agitate for fi fth freedoms, which is the right to fl y directly from one destination to another without necessarily going through your hub, so that you can move goods freely across the continent. That is something that we are also going to be advocating and pushing, so that African trade can happen much more freely within the continent. That is the role we’re playing and working with other airlines.

To what extent has the Single African Air Transport Market been implemented?

This one is an old one and to be absolutely completely honest it is stuck in implementation. I think that African markets, African countries, need to come up with the rules of engagement so that we can activate it. It’s not activated as it should be, so it’s basically known as open skies. So the idea is to get the rules of engagement set, agreed, signed off , so that it can be implemented.

There’s a lot of fears because if you don’t have that in place, how it’s going to be implemented, when, how to make sure there is a level playing fi eld across the various airlines, and how to make it fairer. Once you open up the skies, you will need to make sure that people are playing fair. So, that is really where it is. It’s been there for a long time, but not implemented. Especially with the Africa continental free trade area I think it’s more important that we now really seriously talk about activating it. S What is it like to be the CEO of an airline in i Africa today? A I think it is a huge responsibility because aviation p is extremely critical in the role it plays in propping up c the economic development in Africa. It’s estimated for example that aviation contributes 4% of GDP. a It’s a very important sector to play in and also for c the number of people it employs. There are people e who really rely on the airline business to make a w living and to grow their careers. a It is a great honor and privilege to play that o part and also to demonstrate that we can make b a success of this, cause there’s been a lot of i discussions around why African aviation does not work. And so we come up with strategies that will make this sustainable. That’s one of the things we’re pushing for when we push for consolidation and more collaboration among African airlines.

What keeps you up at night or gets you motivated to go to work every morning?

I think it’s just to make sure that the people who have faith and hope in this particular airline continue having that faith and hope and they don’t lose faith. How to make sure that they continue seeing the greater vision of this company and to keep hope alive. This is what I feel is important for me. So every morning I wake up and see how do I make sure that that message does not wither off , that people still hold on to the hope that we have. We’re a very promising airline and we know we can play our part in sustainable development in Africa.

What book are you reading for inspiration?

I’m reading one called Celebrations of Discipline. Actually it might be the fourth time I’m reading it. That by [Richard] Foster. I think that one is just to help me stay focused. I don’t know maybe everybody else is disciplined. I think it’s always important to maintain your focus and your sharpness. I read a lot of books by John Maxwell. There’s one called Leadership Gold, which am rereading as well. I read a lot about leadership, discipline, self-discipline. And the Bible. https://theparadise.ng/an-airline-ceos-strategy-formaking-african-aviation-sustainable/ Source: https://qz.com/africa/2094880/kenya-airwaysstrategy-for-making-african-aviation-sustainable/ Image credit: newtimes.co.rw