Kenya Airways Obtains Sh2.5bn From Annual Savings

Flag carrier airline Kenya Airways (KQ) has unlocked Sh2.5 billion in annual savings starting next year after negotiating lower charges on a leased fleet of aircraft.

The airline says it has negotiated the reduction of aircraft leasing costs by 21 per cent, as it continues with a restructuring programme that targets to bring down its high-cost base, mainly the high fleet ownership expenses.

KQ’s target is to cut its overall costs by Sh8 billion or 10 per cent of the airline’s total operating expenses of Sh79.9 billion as of 2020.

Its fleet ownership costs by 2020 were valued at Sh28.57 billion. Aircraft leasing costs for the airline in the half year to June 2022 were Sh5.3 billion.

“So far we’ve been able to negotiate a 21 per cent reduction in the lease costs for all our aircraft. This from next year will help us reduce our costs by about Sh2.5 billion every year,” said KQ managing director Allan Kilavuka.

He also said the airline continues with a programme on fleet rationalization, which involves negotiating the return of some aircraft the airline considers expensive to maintain to lessors before the end of their contracts to reduce costs.

Mr Kilavuka said some of the aircraft have been expensive to maintain.

“We are in the process of returning four aircraft (excess aircraft). We are also currently in the process of negotiating a termination of some of our wide-body aircraft, the 777s, which are extremely expensive for us to run.

These were contracted in 2014 and we would like to terminate them because they are very expensive for us to continue having,” Mr Kilavuka said.

The airline trusts that the negotiated leases would help it to break even by 2024, as it attempts to escape the loss-making territory that has made it a permanent burden to the taxpayer, with frequent aid by the government.

“This will help the airline grow,” Mr Kilavuka said.

He termed the 777 aircraft that KQ is pursuing lessors for termination of their contracts to have them returned “not fit for current network”, indicating that the airline has been sub-leasing them to Turkish Airlines.

The airline says the discussions on their return have, so far, been successful.