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KQ planes order raises Kenya’s imports from US to Sh49.5bn

KQ

Kenya Airways chief executive Mbuvi Ngunze (right) welcome the airline’s second Boeing 787 Dreamliner when it was delivered from the US in June 2014. PHOTO | FILE

Kenya Airways’ acquisition of two Dreamliner planes last November propelled the value of Kenya’s monthly imports from the United States to a record Sh49.5 billion, the latest trade data between the two countries shows.

The national carrier added to its fleet two B787-8 planes worth Sh22.4 billion each, marking the last of a batch of nine orders from American manufacturer Boeing.

At Sh49.5 billion, the value of US imports in November alone towers above what Nairobi imported from the US in the whole of 2011, the data indicates.

Kenya Airways, as the airline is known in its international short code, acquired the Dreamliner planes through a sale and leaseback arrangement with Singapore-based aircraft leasing company BOC Aviation, which is owned by the Bank of China.

The plane purchases, however, was not enough to prevent a decline in Kenya’s total imports from the world’s largest economy having dropped to Sh117.4 billion in the year to last November from Sh162.5 billion in a similar period of 2014.

America has in recent years remained the third-largest market source for Kenya’s imports, behind China and India.

Imports from the US in the 11-month period included machinery (Sh11.8 billion), electrical generators (Sh5 billion) and pharmaceuticals (Sh2.3 billion), according to the Kenya National Bureau of Statistics (KNBS).

READ: US overtakes Africa as source of Kenya's imports

The cash-strapped KQ ordered nine of the planes in 2006 as part of the now controversial ‘Project Mawingu’ expansion plan that triggered financial bleeding, pushing the company into the red.

The fleet modernisation programme was largely funded through debt, piling a heavy finance costs burden on its books.

The airline had acquired six Dreamliners by May last year, thereafter, opting to acquire the remaining three on a lease agreement, in an effort to stabilise its flailing cash flows.

In expanding its fleet, KQ had expected to grow its route network from its Nairobi hub and ultimately boost revenues to pay off the debt and leave it with a profit.

The strategy has, however, met stiff competition from the Middle East carriers. Matters have not been helped by Kenya’s depressed tourism industry on which KQ has relied for inbound passengers.

The quick descent into the red has prompted a strategy rethink for the national carrier.

Last month, the airline announced the sale of Boeing B777-200 planes to US-based carrier Omni Air International for an undisclosed amount.

Kenya Airways has also put on the market two Boeing B777-300 planes and a 30-acre piece of land in Embakasi.

READ: KQ sells two Boeing aircraft to US firm

The airline is counting on the mega asset sales to lift it from a Sh25.7 billion loss reported in the year to March 2015.

Kenya’s exports to the US grew by Sh1 billion to Sh37 billion, attributable to the African Growth and Opportunity Act trade pact that grants duty-free access to the American market to a basket of products from sub-Saharan Africa.

This made the US the second-largest market for Kenya’s exports at Sh37 billion after neighbouring Uganda.