Briefly tell me about where Jambojet is at today.
Jambojet is a subsidiary of Kenya Airways. We started operating in 2014, with local operations in Kenya. Right now, we fly to several destinations within Kenya. We have routes such as Malindi, Mombasa, Eldoret and now to Entebbe which is our first international destination. We have 14 flights a week to Entebbe since February last year and so far it is a very promising route.
We use a low cost model and in that, we try and segment the market. There are people who want to get to their destinations and are not necessarily concerned about the frills of flying, the add-ons. The important thing is to get to their destination safely and reliably and that is what we are offering.
It is not just a low cost airline. It is also a regional airline. As soon as we successfully roll out this model in East Africa, we will think of going further, maybe starting with West Africa.
Jambojet is among the fast growing low-cost airlines. What has fuelled this growth?
We are the first formal low cost airline in the region. Low cost flying means your operations are made low cost. One of the things is that you have one Aircraft type so that when it comes to maintenance, fuel and operations, it is seamless and there is a lot of synergy in the group.
Secondly is the way you fly from one destination to another. Most models only allow you to do point to point as opposed to connections on route to destinations. Again, that makes it easier for you to operate cheaply.
Thirdly, when it comes to negotiating with vendors, because we have one type, it is not just the supplier of the aircraft but even the people providing auxiliary services around the aircraft. It is easier for you to get discounts. We have chosen to go for a very efficient aircraft which is a Bombardier Q400. It allows us to offer safety to customers while operating at a low cost.
In the region that we operate in, it is difficult to bring down the cost to the bare minimum unlike in Europe or Asia reason being that things like taxes and other services mean that the services become more expensive. Costs would be lower if our governments would support lowering cost of doing business. There are also many barriers of operating within Africa which increases cost of doing business. This means we cannot be as low cost as we would like to be. There is opportunity to become lower. When it comes to pricing, we have to log in all the costs and make a return to shareholders.
Can you give an estimate of how low the price could get?
If you look at the percentage of taxes and fees being levied, if the percentage of that could go below 1 per cent like it is in other jurisdictions, it would be easier to bring down the cost. Governments are trying to raise revenue through raising fuel levies but if these could be lower, it would be easier for us.
Some competitors have reported low business and other closed. Is Jambojet concerned?
Some airlines close because of high cost of doing business. Some reasons are strategic. Sometimes it is a wrong model and the other is barriers to entry. If you have plans to expand into various jurisdictions and you are not given rights to fly, it becomes difficult and of course customers are looking to you to give them frequencies to fly. We believe our model is going to be successful because we are focusing on how customers can fly reliably, comfortably and affordably. Once you focus on customers and make the right decisions in terms of which destinations people are looking to fly, how you grow sustainably, how you preserve cash to ensure you have money for investment, not expanding too fast, it works.
What is the plan on growing passenger numbers?
We have flown over 2.5 million passengers to date within Kenya and Entebbe. We would like to go faster but the only limiting thing would be making sure we grow responsibly. What that implies is we are funding the expansion with means we can afford.
The other would be the right to fly to other jurisdictions. If it is possible, we can fly to all the neighbouring countries and countries not necessarily our countries of origin. This year, we will be getting a new aircraft which means we are almost doubling our capacity to expand and increase frequencies mostly outside our Nairobi hub.
What is the biggest challenge about operating a low cost airline?
Since we were the first with this model, the first challenge was and is educating customers on what it means. We are saying we are flying affordably and since we are offering you that, the other add-ons like meals or baggage, we would have to remove for us to offer you that fare. Many people fly and do not want to eat so we do not want to penalise them by loading it on their fares. That is not conventional and explaining it is not easy. The market is accepting it though. We are also agile because of our model. So sometimes we find that regulators do not move as fast as we would like to give us the right to fly into different jurisdictions.
How will further liberalisation of the skies benefit you?
The biggest benefit is it easier to fly outside Nairobi. It would be easier to introduce this model so Ugandans can fly easily from Entebbe to other places within Uganda and beyond.
What does your balance sheet look like?
The balance sheet is strong. We are only funded by our parent company so we do not have any debt outside the group.
For the first year, we made a loss, profit in the second, a loss in the third because of elections and a profit last year.
Going forward, we shall be profitable.
How do you deal with competition?
We respect competition. The most important thing is we understand what our customers are looking for and we respond to it quickly. If you are doing that, you have no reason to worry about what others are doing. Also, we are in partnership with some competitors because in this industry, the most important thing is safety. We have responsibility to ensure the airspace we share is safe.
By the end of 2019, it is anticipated that all East African countries will have national airlines, how prepared are you?
There is space for everybody, more people are flying within the region. We believe the national airlines have their customers.
But also, they will create more market because more people will want to fly. If Air Uganda wants to fly Kampala or Dar-Es-Salaam where there is shortage of capacity, that is creating a new market and that is good. The more people fly, the better for everybody so we welcome responsible airlines like those.
In fact it is then that we can differentiate products which is beneficial to passengers. So we continuously offer the best to customers and once we do that, we have little reason to worry.
What is the outlook like?
It is good because if you think about Africa, air travel grew by 6 per cent. There is a lot of growth as Africa only accounts for 2 per cent of global air travel and we have a population of 12 per cent. We are short by 8 per cent of global travel but also economies are growing in East Africa at about 6 per cent. So air travel is growing faster than Gross Domestic Product which is slightly lower than 5 per cent.
Think of the resources being discovered in this region, with oil in Kenya and Uganda, there is a lot more collaboration within the countries. There is a lot more discussion for open trade and free movement of people. Once the open sky is actualised, we can go to many countries freely.