Egypt bank set to arrange KQ’s fleet expansion contract

Kenya Airways has selected Cairo- based Africa Export-Import Bank (Afreximbank) to arrange for a Sh159.6 billion ($1.9 billion) financing agreement for the purchase of 20 new aircraft over the next three years.

Press release: read details on the airline's plans to purchase 20 new aircrafts.

The airline, which raised Sh14.5 billion in a rights issue earlier this month, plans to double it’s fleet over the next five years as it races to connect more African cities and the rest of the world through Nairobi. The financing deal is split into a Sh25.2 billion ($300 million) pre-delivery payment facility — where payment for aircraft begins 24 months before delivery — and an aircraft financing facility of Sh134.4 billion ($1.6 billion).

The money, to be repaid over a period of seven years, will see KQ buy nine Boeing 787-800s (Dreamliners), one Boeing 777-300ER, and 10 Embraer E190s, with the first aircraft expected to arrive in August.

“We have already ordered for some of the aircraft and from August we shall have the first one arrive, and thereafter we shall receive one aircraft per month for eight months,” said Titus Naikuni, the KQ chief executive, at a Press briefing on Monday.

The Brazilian Embraer will be used to connect African travellers to the Nairobi hub since they are short haul planes, while the long haul Boeing planes will link Kenya to Europe and Asia.

The doubling of KQ’s fleet is set to intensify the shortage of flight engineers and pilots.

The main source of passengers for the routes will be African cities mainly in western and central Africa where KQ has intensified expansion.
The airline is eyeing more routes in Africa to rev up earnings on a continent that generates half of its revenues.

KQ’s destinations are expected to increase from the current 53 to 91 in five years — increasing the airline’s appetite for new planes and pilots.

The market landscape is set to shift with the entry of Fastjet which will remodel Fly540. Fastjet said that it would keep fares across East African routes and West Africa at between $70 and $80 (Sh5,900 and Sh6,800).

This has in part prompted KQ to launch its low-cost subsidiary, Jambo Jet, to handle its regional operations in an effort to defend and grow its African turf.

The impending exit of Virgin Atlantic from Kenya will also offer KQ increased opportunities on Europe routes, especially London which accounts for nearly 15 per cent of its revenues.

KQ announced a 53.1 per cent drop in its net profit for the year ended March to Sh1.7 billion on increased costs that raced ahead of revenues.

pmutegi@ke.nationmedia.com