Kenya Airways Revamps Freight to Boost E-Commerce Volumes

(Bloomberg) -- Kenya Airways Plc is revamping its profitable cargo business to make itself attractive to e-commerce companies like Amazon Inc. and Ikea Group in an effort to double the unit's contribution to revenue.

The airline is upgrading its warehouses to handle larger volumes and create an East African hub that can facilitate direct imports and provide temporary storage facilities before the goods are moved to other destinations, Chief Operations Officer Jan De Vegt said in an interview.

Cargo, which currently contributes 10 percent of the group's revenue, should account for as much as 20 percent of the company's turnover in five years, he said.

The carrier, part-owned by Air France-KLM, is reviewing its network as it plans to add as many as 20 new routes over the next five years and buy as many as 10 Boeing Co. 737 Max aircraft. This will include growing its fleet with two freighters, giving it capacity to support the government's push to encourage use of the national airline known as KQ, according to De Vegt.

“I'm starting up a program now to reduce weight on board,” he said, adding it would help improve KQ's ability to carry more goods like fresh-cut flowers to the U.S. The airline would also be able to use lighter trolleys, less paint and lighter containers. “This is especially important for the flower market,” De Vegt said last week.

Kenya supplies more than a third of the flowers sold in the European Union and the horticulture industry is one of the country's biggest generators of foreign-exchange , according to the Nairobi-based Kenya Flower Council.

Kenya Airways shrank its fleet size by 15 percent, reducing cargo yields by 5 percent in the nine months through December.

KQ's shares rose 2.3 percent to 11 shillings by 1:45 p.m. in Nairobi, the biggest gain since June 14

To contact the reporter on this story: Bella Genga in Nairobi at bgenga2@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Vernon Wessels

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