Plane lease end to save KQ Sh4bnThursday March 30 2023
National carrier Kenya Airways (KQ) plans to terminate the lease for two of its Boeing 777-300 aircraft in a move set to see it save between $25 million (Sh3.3 billion) to $30 million (Sh3.9 billion).
KQ chief executive Allan Kilavuka told the Business Daily that the airline is terminating the agreement for the two planes as they do not fit into their current network plan.
The lease for the two aircrafts that carry about 400 passengers and were flying Europe and Middle East routes was initially set to end in 2026.
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“The 777 at the moment does not fit into our network plans and we are working to terminate the lease of the two aircraft. So the process of termination has begun and negotiations are ongoing. One is pretty much complete,” said Mr Kilavuka.
Mr Kilavuka said the savings of up to Sh3.9 billion will be after deducting the termination penalties bearing in mind that the deal was to lapse in three years’ time.
KQ had leased the two planes from an undisclosed firm and then subleased them to Turkish Airlines after scaling down large crafts from its fleet.
The airline will first have to receive the planes from the Turkish Airline before returning them to the owner and save itself from costs such as leasing fees and expenses of servicing idle planes.
The termination of the current lease for the two Boeing 777-300 comes after KQ ended another agreement with Congo Airways, the national flag carrier of the Democratic Republic of the Congo, after six months.
The two airlines had entered a two-year deal in early 2021 where KQ was meant to lease two of its Embraer E190 aircraft to Congo for their cargo codeshare partnership.
The deal was meant to see KQ save over 100 million annually on maintenance costs and earn additional revenue from hiring them.
The Kenyan Government has been pushing for a restructuring of the airline on the back of a multi-billion-shilling bailout plan where the struggling carrier is required to reduce its network and operate a leaner fleet.
KQ has focused on restructuring its fleet, including selling aircraft and sub-leasing to other airlines in an attempt to return to profitability.
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The airline had a fleet of 42 aircraft, either owned or on lease, according to data from its annual report in the year ended December 2021.