Kenya Airways further drop its fleet in cost-cutting plan

Kenya Airways has reduced its fleet by two more planes as part of cost-cutting measures seeking to steady the loss-making airline.

The national carrier’s fleet size narrowed in the last nine months to 41 aircraft from 43 in December 31, 2021, after two leased Embraer 190 aircraft were surrendered following expiry of lease. Of the 41 aircraft, 18 are owned/financed by the airline itself while 23 are on lease arrangement.

The Kenya government is pushing for restructuring of the airline on the back of a multimillion dollar bailout plan where the struggling airline is required to reduce its network, operate a smaller fleet and possibly reduce its workforce.

Kenya Airways (KQ) has focused on restructuring its fleet, including selling aircraft and sub-leasing to other airlines in an attempt to return to profitability. Its fleet size dropped to 39 in 2017 from a high of 52 in 2015, before rising to 43 in 2021.

Lease contracts

The airline is also renegotiating aircraft lease contracts with lessors as part of a string of austerity measures to reduce operating costs. Others are engagement with principal shareholders for financial support, engagement with key suppliers and financiers for moratoria, freeze on non-critical spending and implementation of temporary salary cuts for staff. It has also increased focus on cargo business and has already converted two passenger aircraft to cargo freighters to increase capacity.

“Generally, the costs are within the prevailing market rates at the time negotiating the transactions,” the airline said.

In 2021, KQ’s fleet ownership cost declined by 41 percent to Ksh16.63 billion ($138.58 million) from Ksh28.57 billion ($238.08 million) in 2020, while in the six months to June 30 the fleet ownership cost stood at Ksh321 million ($2.67 million).

Firms that KQ deals with in its leasing plan include the Dubai Aerospace Enterprise, AERCAP, Bank of China Aviation and China Development Bank. Others are Macquarie, Aviation Capital Group, Goshawk, Nordic Aviation Capital, Azzora, and Montrose.