NAIROBI, Kenya, Apr 7 – Kenya Airways Chief Executive Ngunze Mbuvi says he expects the airline to save Sh9 billion from the sale and sub-leasing of its fleet.
Mbuvi assured the Senate Committee on Transport that the national carrier will register improved performance when it presents its half year results.
The airline sold two of its aircraft saving it Sh200 million in fleet costs. It also entered into an agreement to sub-lease five other aircraft which will reduce the lease costs by Sh500 million.
“What is most efficient today is that we have cash to operate day to day and that is why we are looking different ways to generate that cash,” Mbuvi stated.
“If you recall at the half year when we released our results we had reduced our operating costs significantly from 2014/15 to 2015/16 however because of the exchange rate movement we have a big impact on the exchange rate and also a big impact of interest because we are borrowing more. But the underlying part of the business which is the operating part of the business improved significantly this year and I have every expectation that when we announce our results later it will be in that context.”
Kenya Airways is planning to reduce its fleet to 36 aircraft from the current 52.
The KQ Chief Executive Officer further defended the sale of its landing slot at London’s Heathrow Airport to Oman Airlines and sale of land in Embakasi saying they were commercially untenable.
KQ last month announced that it had changed its flight schedule on the Nairobi-London route as part of its cost-cutting strategy.
“When I am coming to my shareholders for money I have to monetize the assets that I have that I may not use 100 percent, because I need money today. So you have to make a choice between those assets that are strategic to you and you have to keep and those that you have to monetize.”
The carrier, which currently departs for London in the evening, arriving at Heathrow the following morning, will now depart from JKIA in the morning, arriving at Heathrow in the evening.
While previously the plane stayed on the ground for 14 hours at Heathrow Airport until evening for the flight back to Nairobi, it will no longer do so but will fly back two hours after the 4.15pm landing – a schedule that should help the airline to significantly cut its parking costs.
Ngunze said the selling off its prime landing slot at the airport for an estimated Sh7.5 billion could significantly affect the airline’s attractiveness to passengers on the UK route and slow down the speed of recovery.
KQ made a loss of more than Sh25 billion in the last financial year ending March 31, 2015 forcing it to put in place resizing measures such as sale of its two Boeing 777-200 fleet and the planned retrenchment and redeployment of the 600 employees.
Ngunze said Thursday the restructuring process will start in May and accounts for 10 percent of their overall turnaround plan.
Following the poor performance, the Senate formed a committee to probe KQ operations which was adopted in December last year states the airline is of national importance and would need more capital from its shareholders.
However, Senators recommended the new injection of funds should only happen after management changes, a condition that the Treasury concurred with. In September 2015, KQ got $200 million bridging loan from Afrexim.
The government also gave it Sh4.2 billion to help the airline meet its immediate cash obligations.