Sunday 01, July 2018 by Bloomberg

Kenya Airways dusts off expansion dream with 10 Boeing plan


Kenya Airways Plc revived long-shelved plans to expand its network by proposing to buy as many as 10 Boeing Co. 737 Max aircraft as part of a five-year strategy

The move follows three consecutive years of losses caused by a poorly executed expansion strategy and fuel-hedging contracts that saw it miss out on rock-bottom oil prices. The losses forced the company into austerity measures that included job cuts, a 15 per cent fleet reduction and the abandonment of an expensive but valuable landing slot at London’s Heathrow airport.

“We’ve put out a proposal for 10 planes at the moment,” Chief Operations Officer Jan de Vegt said in an interview in the capital, Nairobi, on Wednesday. “We will then have to take two to three years at least to introduce them. You have to train pilots.”

Part-owned by Air France-KLM, Africa’s third-biggest carrier has 40 aircraft, with which it services mainly routes on the continent. That includes two Boeing 787 Dreamliners and three Boeing 777-300 aircraft that are sub-leased to Oman Air Transport and Turkish Airlines respectively. KQ, as Kenya Airways is known, intends to take them back between September this year and December 2019.

The current fleet is insufficient for new routes the carrier plans to take up, De Vegt said. KQ will begin direct flights to the U.S. on 28 October.

“The Max, for instance, could take us to Rome, which our present 737s can’t,” he said. The jet has new engines, better aerodynamics and uses less fuel, “and if you use less fuel you can put more on board and you can fly farther.”

In 2018, KQ plans to retire its Boeing 737-300 aircraft after more than two decades in operation and its final Boeing 777-200ER, according to the company’s annual report. It cut its full-year losses to 10.2 billion shillings ($101 million) in 2017, from a record KES26.2 billion a year earlier and plans to reinstate fixed-price fuel contracts in the third quarter that it abandoned in 2016.

In November, KQ completed a reorganisation that resulted in the Kenyan government increasing its stake to 48.9 per cent from 29.8 per cent and Air France-KLM’s share shrinking to 7.8 per cent from 26.7 per cent. Domestic lenders were also forced into taking 38.1 per cent ownership in a debt-for-equity swap.

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