Companies

KQ eyes new deal with lessors in a month

kq

A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

Kenya Airways (KQ) is set to ink a deal with 12 lessors to change the lease terms on its aircraft fleet to hourly rates from fixed charges as part of a cost-cutting measure aimed at seeing the airline return to profitability.

Kenya Airways chief finance officer Hellen Mathuka said the carrier, which had opened negotiations with lessors in April is in the final stage of negotiations with all new aircraft owners to only pay when they fly leased aircraft.

However, one lessor out of the 12 is yet to agree to the new payment plan, which will be a departure from the previous agreement where KQ would still pay the lease amount even if a plane is idle.

“The negotiations with all the 12 lessors are still ongoing. We are hoping to finalise this by end of July 2022. We are unable to share more details at this point due to contractual obligations,” said Ms Mathuka in a response to Business Daily queries on Monday.

The national carrier has a fleet of 42 aircraft, either owned or on lease, according to data from its financial report in the year ended December 2021.

These comprised nine Boeing 787 wide-body jets, 10 Boeing 737 narrow-body jets, 15 Embraer regional jets, two Boeing 737 freighters, and six Bombardier Dash 8-400.

KQ has been trying to cut costs to remain afloat amid the challenges of the Covid-19 pandemic and legacy problems.

Restructuring its fleet, including selling aircraft and sub-leasing to other airlines, has been one of KQ’s focus areas in recent years as it seeks to return to profitability.

The fleet size has been dropping since 2015 in a period that has seen KQ struggle to return to profitability after making steep losses in 2014, causing some of its engineers and pilots to seek greener pastures.

It had 52 aircraft in 2015 and the fleet dropped to 39 in 2017 before rising to 42 last year.

The new arrangement has seen the cost of maintaining its fleet drop from Sh28.5 billion in 2020 to Sh16.6 billion last year.

It also saved Sh11 billion in the last financial year on aircraft ownership fees after changing the lease terms on its fleet from fixed costs to hourly rates.

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