Now it is NOT the smaller guy going after the big ones. Are we going to stop this? BTW: how about the other side of the price war? Don't do we today have more people affording to call than was the case before prices came down? What would be the cumulative economic benefit of all these people that have access that they didn't? -----------------

Price wars hit the airline industry with Fly540 undercutting Kenya Airways' fares. Fly540 has slashed its fares on the Nairobi-Mombasa route by 30%, setting the stage for renewed price wars as airlines seek to defend their market share. Mombasa is one of the busiest routes in the domestic market because of tourists and business travelers. Its new fare for the route is KES 6,540 from KES 9,540 for a return ticket; the cheapest airline on the route. Kenya Airways (KQ) charges KES 7,999.Airlines cashed in on the route during the December high season. However, with the sector recording low travel numbers in January, airlines will have to rethink their strategies to grow revenue. Fly540's move is set to trigger a renewed pricing war in the airline sector similar to that of the mobile telephony firms: Bharti Airtel and Safaricom. In December, KQ increased its daily flights on the route to 14 from 10, which helped grow its passenger numbers by 35% in December and KQ is planning to introduce bigger planes such as Boeing 737-300 and Embraer 170s on the route. The ongoing price battle will dent earnings of airlines, especially those that fly in fewer regions; hence KQ is unlikely to feel the effect as the domestic market accounts for only 4% of its revenue. KQ rivals (who in recent months have been diversifying to the eastern Africa region) generate a significant share of their revenues from the Nairobi—Mombasa route. Fly540, for instance, has been busy on the expansion trail as it seeks to reduce its reliance on the Mombasa route and now covers more than 12 destinations in Kenya and has moved to Bujumbura, Entebbe and Dar es Salaam. Kenya is targeting KES 100bn (USD 1.25bn) from tourism this year after surpassing the peak 2007 season in the eight months to August—raising the business outlook for airlines flying to tourist destinations like Maasai Mara, Mombasa and Malindi. (Sources: Daily Nation; African Alliance Research)

Matunda Nyanchama, mnyanchama@aganoconsulting.com Agano Consulting Inc.; www.aganoconsulting.com ---------------------------------------------------------------------------------------------- “If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.”- George Bernard Shaw ----------------------------------------------------------------------------------------------- This e-mail, including attachments, may be privileged and may contain confidential or proprietary information intended only for the addressee(s). Any other distribution, copying, use, or disclosure is unauthorized and strictly prohibited. If you have received this message in error, please notify the sender immediately by reply e-mail and permanently delete the message, including any attachments, without making a copy. Thank you.