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Kenya Airways expects savings of Shs 4.85 billion from new aircraft lease terms

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Kenya Airways expects savings of Shs 4.85 billion from new aircraft lease terms


A fleet of Kenya Airways aircraft at Nairobi’s Jomo Kenyatta International Airport. FILE PHOTO | NMG

Kenya Airways expects to save $ 45 million (Sh4.85 billion) this year after changing the lease terms of its aircraft fleet, opting for hourly rates over fixed costs.

The airline has negotiated with its lessors a productivity-based payment method to avoid fixed cost and reduce expenses related to fleet management at a time when the airline is struggling with low passenger demand.

Of the 36 aircraft managed by KQ, the airline has leased 19 to different lessors.

Managing Director Allan Kilavuka said the airline is working to move away from or reduce fixed cost for both the fleet operation and its employees.

“We have been successful on the fleet side because we have been able to move towards hourly pay for all of our lessors by 2021 and that should bring us significant cash savings for us estimated at $ 45 million,” he said.

However, KQ has failed to reach an agreement to have its pilots paid per trip as the national airline seeks a lower salary bill to weather the coronavirus storm that has crushed demand for air travel.

The airline also cut $ 3.1 million after terminating a lease for the lessors’ two Boeing 737-700s.

Pilots make up 10 percent of the airline’s total workforce, but take home the equivalent of 45 percent of total employee pay or Sh6.1 billion based on the airline’s wage bill for the year through December.

KQ’s net loss in the financial year to December nearly tripled to Sh36.2 billion, the highest in its history, joining other global airlines in lost revenue.

The airline has cut its frequencies at this time due to low demand, a measure that has seen a good portion of its fleet underutilized.

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