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Kenya Airways to Streamline Fleet, Cut Costs
Kenya Airways (KQ) has taken a significant step in optimizing its fleet and network plan by embracing a cost-cutting measure known as mono fleeting. The decision, which was made during the 47th Annual General Meeting, will see KQ gradually phase out its Embraer and Bombardier aircraft and shift its focus to Boeing planes, reports Business daily. The move comes as the airline aims to streamline its operations and achieve long-term sustainability amid challenges in the aviation industry.
Mono fleeting, a strategy favored by low-cost airlines, involves operating a single type of aircraft to reduce costs related to maintenance, training, and spare parts. By choosing to standardize its fleet around Boeing planes, Kenya Airways aims to benefit from increased commonality and operational efficiency. CEO Allan Kilavuka emphasized that the transition would be gradual to avoid operational disruptions and ensure a smooth and successful implementation.
“The board has approved that we move towards the Boeing aircraft. This is, however, going to happen progressively and not in one shot because we don’t want to overheat,” said Kilavuka said last week.
The decision to ditch Embraer and Bombardier jets is expected to yield various advantages for Kenya Airways. Firstly, it allows the carrier to operate larger aircraft, which can cater to growing passenger demand more effectively. In 2022, Kenya Airways recorded a remarkable 68% increase in passenger numbers, reaching 3.7 million passengers. By opting for Boeing aircraft, the airline can accommodate more travelers and capitalize on the upsurge in travel demand.
Additionally, the move towards mono fleeting aligns with KQ’s previous restructuring efforts. In 2022, the airline experienced a remarkable 66% increase in revenue, reaching KES 117 billion (US $831 million). Despite facing headwinds such as a 160% year-on-year increase in fuel costs and the impact of the depreciation of the dollar on operating expenses, Kenya Airways remained resilient. These positive indicators have bolstered the airline’s confidence in its turnaround plan, with the target of achieving profitability by 2024.
Furthermore, the transition to Boeing planes is expected to positively impact Kenya Airways’ fleet ownership costs. The airline has already achieved an average lease reduction of 22% across its fleet by restructuring lease rentals with several lessors. Moreover, the carrier’s current fleet, with an average age of 10, is fuel-efficient, contributing to operational cost savings.
Project Kifaru, as the initiative is called, marks an essential step for Kenya Airways in its journey towards sustainability. However, the airline’s debt load, estimated at Sh189.3 billion ($1.347 billion), remains a challenge. To ensure long-term success, attracting a strategic investor is crucial for comprehensive debt and capital restructuring.
In 2022, KQ operated 39 aircraft, both owned and leased, including nine Boeing 787 wide-body jets. Additionally, the carrier operated 13 Embraer regional jets and eight Boeing 737 narrow-body jets plus two Boeing 737 freighters. Its wholly-owned subsidiary, Jambojet, operated seven Bombardier Dash 8-400 aircraft.
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