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Wealthy Kenyans cut aircraft orders by half

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Economy

Wealthy Kenyans cut aircraft orders by half


AIRPLANE-SUNSET

Summary

  • The drop in registration of new aircraft came in a year when the coronavirus pandemic that caused a slump in air travel, reducing the need for purchase of commercial flights.
  • The virus, which disrupted businesses and hammered most assets classes, reduced the net worth of wealthy Kenyans and saw the rich drop aircraft purchase plans from the priority list.
  • Kenya’s business magnates, politicians and new millionaires have in recent years taken to flying as the preferred mode of transport – expanding the market for leasing and private ownership of planes

Wealthy Kenyans and private aviation firms last year cut purchase of aircraft by half in the wake of the Covid-19 pandemic that reduced the millionaires’ net worth and demand for commercial flights.

The Kenya Civil Aviation Authority (KCAA) registered 32 new aircraft last year, down from 63 in 2019, pushing the total number of planes in the country to 1,525, excluding those owned by the National Police Service and the Kenya Defence Forces.

The drop in registration of new aircraft came in a year when the coronavirus pandemic that caused a slump in air travel, reducing the need for purchase of commercial flights.

The virus, which disrupted businesses and hammered most assets classes, reduced the net worth of wealthy Kenyans and saw the rich drop aircraft purchase plans from the priority list.

Kenya’s business magnates, politicians and new millionaires have in recent years taken to flying as the preferred mode of transport – expanding the market for leasing and private ownership of planes.

“Covid-19 might have delayed a few plans for people to invest in the airline business in Kenya. This is partly to blame for the drop in the number of aircraft we registered last year,” KCAA Director-General Gilbert Kibe told the Business Daily in an interview yesterday.

The aviation regulator registered two aircraft owned by individuals last year, down from 13 in 2019, as the rich reduced their appetite for helicopters and small jets.

This marked a break with the increased purchase of aircraft by the rich over the past decade.

Aero Club of East Africa – a lobby group of private aircraft owners – attributed the recent growth in the number of registered planes to Nairobi’s rising status as the region’s business hub and a growing number of wealthy individuals with the means to own and maintain an aircraft.

But Covid-19 has not spared the rich after Kenya’s economy dipped to a recession last year.

The economy’s performance in 2020 was hit by the effects of restrictions that were put in place to contain the spread of the virus — including business closures and layoffs.

The latest instalment of the Knight Frank Wealth Report shows the number of Kenyans with a net worth of at least $30 million (Sh3.3 billion) including their primary residence dropped to 90 last year, from 106 in 2019

Kenya’s group of high-net-worth individuals, defined as those with at least $1 million (Sh109 million) including their primary residence, dropped by an even larger margin.

The report says that 912 Kenyans fell out of this club last year when their numbers stood at 3,323 compared to 4,235 in 2019.

KCAA reckons that government agencies, which bought three planes in 2019, failed to make an order last year.

Private aviation firms cut their orders to 30 planes from 47 a year earlier, reflecting a drop of 36.1 percent.

The pandemic has caused a slump in air travel, with African airlines expected to have lost $6 billion in passenger revenue in 2020.

Kenya in March confirmed the first Covid-19 case, which prompted the government to suspend domestic and international commercial passenger air travel.

Although domestic air travel resumed in July, followed by international routes a month later, demand has stayed below pre-pandemic levels.

Besides convenience, wealthy individuals have also acquired aircraft to satisfy their ambitions for reliable and personalised travel.

Air operators say that the biggest headache in owning an aircraft lies in operational and maintenance costs, including high jet fuel prices, airport landing fees, parking fees, insurance and spare parts.

Wilson Airport in Nairobi handles about 90 per cent of domestic flights that mainly comprise chartered and commercial flights to holiday destinations such as Masai Mara Game Reserve, Mombasa, Amboseli National Park, Lamu, Kilimanjaro, Diani, Lokichogio and Nanyuki.

It is currently ranked among the busiest airports in terms of aircraft movement in East and Central Africa.

Last year about 101 planes abandoned at various airports across the country were put on auction to clear rising parking charges after the Kenya Airports Authority (KAA) declared them a safety risk.

The cost of running the aircraft are increasing with the regulations requiring that they be parked at gazetted points like Wilson Airport, which adds to the ownership bill.



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