Kenya Airways expects to save $45 million (Sh4.85 billion) this year after it changed the lease terms on its aircraft fleet, opting for hourly rates in place of fixed costs.
The carrier has negotiated for a productivity-based method of payment with its lessors to avoid the fixed cost and cut expenses involved in fleet management at the time the airline is struggling with low passenger demand.
Out of the 36 planes that KQ manages, the carrier has leased 19 from different lessors.
Managing director Allan Kilavuka said the airline is working on moving away from the fixed cost or reduce it for both fleet operation and on its employees.
“We have been successful on fleetside because we have been able to move towards pay by the hour for all our lessors for 2021 and that should bring us significant cash savings for us estimated at $45 million,” he said.
However, KQ has failed to reach a deal for its pilots to be paid per trip as the national carrier seeks a lower wage bill to weather the coronavirus storm that has crushed air travel demand.
The airline has also cut $3.1 million after terminating a leasing agreement of the two Boeing 737-700 from the lessors.
Pilots account for 10 percent of the airline’s total workforce but take home the equivalent of 45 percent of the overall payout to employees or Sh6.1 billion based on the carrier’s wage bill for the year to December.
KQ’s net loss in the financial year to December nearly tripled to Sh36.2 billion — the highest ever in its history — joining other global airlines in losing revenue.
The airline has cut on its frequencies at the moment due to low demand, a move that has seen a good number of its fleet underutilised.
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