Home Economy Wealthy Kenyans now sell planes to survive Covid-19

Wealthy Kenyans now sell planes to survive Covid-19

A section of Wilson Airport in Nairobi on August 9, 2016. PHOTO | SALATON NJAU

Wealthy Kenyans and private aviation firms last year sold 72 planes in the wake of the Covid-19 pandemic that reduced the millionaires’ net worth and hit demand for travel.

The Kenya Civil Aviation Authority (KCAA) data show the number of registered planes dropped to 735 from 807 in 2019, excluding those owned by the National Police Service and the Kenya Defence Forces.

The drop came in a year when coronavirus triggered a slump in air travel and reduced the need for purchase of commercial flights.

The virus, which disrupted businesses and hammered most asset classes, reduced the net worth of wealthy Kenyans and saw the rich reduce their appetite for helicopters and small jets.

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.

“Any drop in the number of registered aircraft means that the planes were either sold or left the country due to other reasons,” KCAA Director-General Gilbert Kibe told the Business Daily.

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

Aero Club of East Africa – a lobby 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 Covid-19 restrictions leading to including business closures and layoffs.

The economy has been picking up after posting a contraction of 0.3 percent in 2020.

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.

The pandemic has caused a slump in air travel, with African airlines expected to have lost $6 billion in passenger revenue in 2020. “The airline business in Kenya is suffering and this means that people could not acquire more planes,” said Eutychus Waithaka, the executive secretary of the Kenya Association of Air Operators.

“We had requested a stimulus package from the government that we have not seen to date. Some airlines have actually closed shop because they were operating with leased planes,” he said.

Kenya in March last year confirmed the first Covid-19 that 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 percent 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 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 declared them a safety risk.

The cost of running the aircraft are increasing with the regulations requiring parking at gazetted points such as Wilson Airport, which adds to the ownership bill.