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Kenya Airways Downsizes Fleet, Cuts its Operational Costs
During the last few years, Kenya Airways struggled financially. One would argue that many airlines globally have found a tough going but for Kenya Airways, the fate of the airline hangs in the balance. The government — who has been writing checks to keep the airline afloat — is now demanding the carrier to restructure.
Part of this is an impressive fleet disposition, according to Kenya’s The Star Newspaper. The airline has a fleet of 36 aircraft, including 15 Embraer E190ARs, nine Boeing 787 Dreamliners, eight Boeing 737-800s, two Boeing 737-700s who are inactive and two Boeing 737-300s. Kenya Airways may be forced to reduce its fleet to 30 aircraft and may have to streamline its workforce further as the national carrier looks to cut costs, as reported by Kenya’s The Star newspaper.
So far, no decision has yet been made, according to the carrier’s chairman Michael Joseph but winding down of some of the carrier’s Boeing 787 Dreamliners and a number of its E190s looks to be the likely choice for the SkyTeam Alliance carrier. However, reports indicate that the carrier is expected to maintain its fleet of 737s.
According to sources, this is in line with a recovery and turnaround plan completed late last year for Kenya Airways by London-based consultants Steer Group.
The Airline’s Recovery Plan
Kenya Airways is fortunate to have strong government support to ensure its survival and emerge a much different airline group post-pandemic. In the last few months, the focus has been on bolstering liquidity and maintaining a skeleton schedule.
According to the International Monetary Fund (IMF), the Kenyan government agreed to assume $827.4 million of the airline’s debt and provide financial support in the 2022-2023 financial year.
The international lender revealed that the Kenyan government would provide $473 million to handle the airline’s payment obligations and restructuring costs as part of the assistance package.
Early this month, Allan Kilavuka, the airline’s CEO, welcomed the government’s conditional bailout saying it will help the airline strengthen its cash flow and speed up much-needed reforms including its network, fleet and operations
“The financial support will help the airline strengthen its cash flow and speed up much-needed reforms including its network, fleet and operations. Other areas focus on cost restructuring, productivity and efficiency,” Kilavuka said, according to local media.
Kenya Airways is now conducting a major review of its fleet and network, with the appointment of Seabury Consulting to advise on its long-term business plan as well as improving its revenue. Reducing the group’s headcount may be a viable otion for the airline as it works aggressively to cut other costs but most of which are fixed costs.
Meanwhile, the Kenya Airline Pilots Association (KALPA) and the Kenya Aviation Workers Union (KAWU) warned further lay-offs were not an option. “KQ must address corruption and system losses if it wants to remain competitive. Downsizing is not a solution to financial issues and growth,” a KAWU spokesperson said.
A recovery plan dubbed the “Kenya Aviation Recovery Road Map ” prepared by the lobby group last year calls for the diversification of Kenya Airways’ business model through the establishment of secondary hubs, rapid expansion of profitable routes, replacing some of the E190s with larger aircraft such as B737-800s or Airbus A320 Family aircraft and combination passenger/cargo options.
Kenya Airways ended 2020 with a workforce of 3,652 — a loss of about 1,123 employees — mostly through resignations or voluntary early retirements.
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