One of the biggest airlines in Africa, Kenya Airways, has saved $45 million ((Sh4.7 billion) after it changed the lease terms on its aircraft fleet, opting for hourly rates in place of fixed costs. Kenya Airways Chief Executive, Allan Kilavuka, said the airline reached a deal with lessors in 2021 to only pay when they fly leased aircraft.
The deal saved the airline billions, switching from paying for idle aircraft during the year affected by COVID-19 to only making payments when leased planes were flying. The East African national carrier has a fleet of 36 aircraft and it owns 19 of these, while it has leased 17 from the lessors that include Nordic Aviation Capital and GECAS. Embraer forms the bulk of its fleet with 15 aircraft.
“The big one in 2021 was negotiation with our lessors and got concessions reduced on our lease rentals from fixed to what we call pay by the hour. So, you pay by the hour, which is where you pay as you fly.
That was big, saved us almost 45 million dollars for 2021,” he said. KQ, as the airline is known by its international code, has been trying to cut costs to remain afloat amid the challenges of COVID-19 and legacy problems. It has also cut $3.1 million after terminating a leasing agreement of the two Boeing 737-700 from the lessors. Cost-cutting measures
The carrier is planning to cut its aircraft fleet to 30 from the current 36, a cost-cutting measure that is likely to see a number of employees sacked. A source privy to recommendations by Steer Group and attended an induction meeting between a new consultant and KQ top management told New Telegraph under strict condition of anonymity that the national carrier is considering cutting Boeing 787s to five and reducing Embraer 190s from 15 to 10.
According to the source, the consultancy firm, Steer Group, concluded its turnaround plan for the airline late last year. It is, however, expected to maintain the number of B737s at 15. Talks of fleet cut, perhaps, signals reorganisation plan at the country’s national carrier, which was presented to the International Monetary Fund (IMF) ahead of the Sh26.6 billion capital injections by the National Treasury in the supplementary budget for the current financial year.
More bailout The carrier said it has also resorted to delays in paying creditors and suppliers, even as it eyes additional resources from a multibillion government […]