Air traffic delays and airline operating cost in Kenya: the case of Kenya Airways
The linkage between flight delays and airline costs has become a major issue in discussions of the effectiveness of the air transportation system as many airports in the world become increasingly congested as they attempt to cope with rising passenger numbers. However, studies of this link increasingly focus on developed countries and this phenomenon has therefore not been documented for Kenya. Although the operating cost of Kenya'S major airline, Kenya airways has increased tremendously in the recent years, little information currently exists on airline costs and how policy can effectively influence airline operating costs in Kenya. It is against this background that this study is being conducted. The study presents an empirical analysis of the determinants of airline operating costs in Kenya using Kenya airways operating statistics. The main objective of the study however, was to investigate the effect of the poor performance of the air transportation system in Kenya (proxied here as air traffic delays) on airline operating costs and based on the findings draw policy recommendations to mitigate airline costs. Least Squares method is used to examine the effect of air traffic delays and the traditional volume and capacity variables on airline operating cost. Half yearly time series data for the period from 1995 (when Kenya Airways commenced its privatization process) to the first half of 2011 is used to estimate a long-run cointegrating equation and run an ECM regression. Results reveal that air traffic delays and output volumes are important airline cost drivers in Kenya. The result therefore supports the view suggested by earlier studies that poor performance of the air transportation system is associated with increase in airline operating costs. The study recommends investments to modernize and expand the aviation and airport infrastructures in Kenya so that they can accommodate air traffic growth without large increases in delay. Results for cargo lifted indicate that configuring passenger aircraft to accommodate more cargo in lieu of passengers increases operating costs. The study further establishes that there are economies of scale in the use of large aircraft and in serving a wide and dense route network.