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KQ spending Sh0.5m daily on four idle planes

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A Kenya Airways plane at the airport. FILE | PHOTO | NMG

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Summary

  • The national carrier says it spends an average of Sh465,000 a day or Sh14 million monthly to maintain two Embraers and two Boeing 737s.
  • Keeping planes on the ground is a common tactic by airlines keen on cutting costs during low business.
  • A significant drop in travel led to the grounding of approximately two-thirds of the global airline fleet at the peak of the Covid-19 pandemic in April 2020.

Kenya Airways #ticker:KQ is spending close to Sh500,000 daily on maintenance of four idle aircraft parked at the Jomo Kenyatta International Airport (JKIA), underlining the negative impact of the Covid-19 pandemic on the airline’s business.

The national carrier says it spends an average of Sh465,000 a day or Sh14 million monthly to maintain two Embraers and two Boeing 737s that are currently on storage after it cut down on its routes since resuming international flights in August last year.

“We are spending on average approximately $128,000 (Sh14 million) per month to support the various storage-related maintenance activities… These are direct maintenance costs for the ones that are not in use,” said Kenya Airways.

Keeping planes on the ground is a common tactic by airlines keen on cutting costs during low business.

A significant drop in travel led to the grounding of approximately two-thirds of the global airline fleet at the peak of the Covid-19 pandemic in April 2020, estimates by the International Air Transport Association(IATA) show.

Although travel has since resumed on key international and regional routes, passenger numbers remain low due to public health safety restrictions—forcing airlines KQ to keep part of their fleet grounded to limit costs.

KQ has currently grounded two Embraer and two Boeing 737 because of limited capacity on key routes while one of its Boeing 787 Dreamliner planes is out undergoing heavy maintenance commonly referred to as C Checks in aviation parlance.

The Kenyan national carrier has a fleet of 36 aircraft, 19 of which it wholly owns while the rest are leased. Embraer makes up the bulk of its fleet with 15 aircraft.

The medium-range Embraer planes are mainly used for routes within Africa. KQ also uses them on the local routes to Kisumu and Mombasa. African routes generate the bulk of the revenue that KQ earns every year as it remains the largest market for the carrier.

“It is, however, important to note that even though most aircraft are in use, our utilisation per day is still low, at approximately 60 percent compared to pre- Covid times,” KQ said in emailed responses to Business Daily queries.

The airline says it is currently operating on 40 international and two domestic routes.

“The frequencies that we are operating to these destinations are very low, at about 35 percent of the frequencies we used to operate pre-Covid” the airline said.

KQ is under pressure to steady its financials after its net loss for the financial year ended December 2020 nearly tripled to Sh36.2 billion on account of Covid-19 disruptions — the worst ever in the history of the airline.

The loss was 2.8 times more than the Sh12.98 billion net loss it had posted a year earlier while total income for the fiscal year dipped by 58.9 percent to Sh52.8 billion —leaving the airline’s management in a precarious position even as the global aviation industry resumed operations.

KQ said it was optimistic about regaining some lost ground on improving demand for passenger and cargo services.

The airline said summer travel bookings in countries like the USA and France have shown improved cabin factors averaging 70 percent during the period that normally runs from June.

However, the rest of Europe, the UK, India, and most African destinations remain weak, pulling down the average cabin factor to about 35 percent.

The UK and other European countries have imposed travel restrictions on people coming from countries where Covid-19 cases are high. It has placed Kenya on the red list, barring all travellers connecting from Nairobi from entering Britain.

China has restricted the number of flights that KQ can make in a day to the Asian country.

America issued a fresh travel advisory against Kenya last week, downgrading the East African nation from level two to level three, which requires US citizens to avoid all non-essential travel.

Tourism industry players had hoped that the recent visit to the UK by President Uhuru Kenyatta, including a meeting with his British Prime Minister Boris Johnson, would help in lifting Kenya from the red list.

Kenya, whose cases of Covid-19 have been surging for the last two weeks, has been maintained on the travel ban where it was first placed in April even after several media outlets in the UK had projected that Nairobi would join countries like Qatar, Baharin, UAE and India that have been moved to amber list.