New craft leasing terms save KQ Ksh.1.5 billion

Kenya Airways (KQ) has conserved Ksh.1.5 billion in cash across six months after successful negotiations on craft leasing terms with its lessors.

This to set itself on a path expected to yield to up to Ksh.4.9 billion ($45 million) in savings from fleet ownership and operations by the end of December.

Reduced operations by the carrier due to the ongoing COVID-19 pandemic strife has forced the airline’s hand in negotiation its pre-existing leases.

“We have mainly focused on operating leases. What we have done is negotiate with our lessors so that they can amend the lease terms. This were long and difficult discussions but in the end, we have been able to extract some amendments to the leases,” Kenya Airways Chief Executive Officer Allan Kilavuka said on Thursday.

“The bottom line is to look at the least fleet ownership cost that we can get.”

With KQ operations greatly reduced with the stay of the pandemic and subsequent travel restrictions, the airline management has been pushing to tweak clauses on its leases as some of its planes sit idle on the runaway.

For instance, KQ has previously negotiated to only pay for leases when the leased craft is in operation.

Out of its fleet totaling to 36, 19 are crafts are under operational leases including three Boeing 787 Dream-liners, six Embraers, eight Boeing 737s’ and two Boeing 777s’.

KQ has been working to squeeze out costs, a push it deems to be the only remedy ahead of the eventual recovery of air-traffic demand.

On Thursday, Kenya Airways shaved 12.8 per cent from its total operating costs to Ksh.38.9 billion as it posted a narrowed Ksh.11.5 billion half year loss.

At the same time, KQ saved an additional Ksh.155 million from ongoing workforce reduction and payroll review.

In 2020, the carrier cut Ksh.3.4 billion from payroll related costs as it begun implementing a blanket reduction to staff salaries.