KQ avoids Losing the Aircraft deposit of Sh310 Million

Kenya Airways (KQ) was able to prevent a further hit to its bottom line by securing an extension of the validity period for a Sh310 million non-refundable deposit to Boeing.

The extension, which will last at least a year, was confirmed by KQ Chief Executive Allan Kilavuka on Thursday.

The decision came at a time when KQ was sliding into a full-year loss of Sh36.26 billion for the year ended in December, and it has helped the national carrier avoid a further dent in its books.

Kenya Airways made the deposit to the US aircraft manufacturer in order to purchase new aircraft and expand its fleet in the face of fierce competition from regional rivals, particularly Ethiopian Airlines.

“Yes, we have agreed to an extension with Boeing,” said.

“The extension would be for at least one year to mid-next year. The extension is not limited to new aircraft but for any service or good from Boeing.”

Given that deposits for plane purchases are non-refundable if a carrier doesn’t make the purchase, KQ had previously stated in its annual report for the previous year that it ran the risk of losing the money.

Although KQ did not specify whether the increase was due to more money being put in or to fluctuations in the value of the shilling against the dollar, the deposit had increased from Sh280 million in 2021.

Due to debt and rising fuel costs, KQ’s loss more than doubled from Sh15.87 billion in the year to December 2021, making it even more difficult for the airline to purchase new aircraft.

However, Mr. Kilavuka refrained from disclosing the quantity and timelines of the new aircraft that KQ is considering, citing the airline’s mounting losses and precarious financial position.

Rival airlines like Ethiopian Airlines have been on an ambitious plan to expand their fleet and keep a lead in the aviation sector in Africa by providing passengers with novel experiences.

Last year, Ethiopian Airlines upgraded its A350-900 orders to the A350-1000 model, making it the first African airline to once again own the largest variant of the Airbus A350 models, further eclipsing KQ.

With aircraft from Boeing and Bombardier, Ethiopian Airlines has the largest fleet in Africa and is keen to continue expanding it.