East African carrier, Kenya Airways is eyeing cutting its fleet of Deamliner aircraft by four and its Embraer aircraft by five bringing its 36 planes to 27.
According to simpleflying.com , the yet un-confirmed move is part of a broader turnaround strategy that aims to cut costs and rejuvenate the airline. Kenyan media report Kenya Airways’ Boeing 787-8 and Embraer E190-100ARs fleets are set to shrink.
Embattled Kenya Airways enlisted the London-based Steer Group to put together a turnaround plan last year. Kenya Airways posted a US$333 million loss in 2020 (2021 numbers are yet to be released), but its financial woes predate COVID-19. The airline has been insolvent for 10 years.
“Kenya Airways has come up with short, medium, and long-term strategies to help in realizing two main objectives. The first is to survive the current depressed market, and the second is to implement strategies that will make the business more sustainable in the long term,” said Kenya Airways CEO Allan Kilavuka last May.
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According to Kenya’s Star newspaper, the Steer Group has finished its turnaround plan and during a meeting between the consultancy and airline executives, the prospect of trimming Kenya Airways’ fleet was raised. Notably, if planes go, so will jobs – further reducing costs at the airline.
Kenya Airlines Chairman says nothing is yet decided
After substantial job losses already at the airline, the Kenya Airline Pilots Association (KALPA) and the Kenya Aviation Workers Union (KAWU) are not in favor of further job cuts.
“Nothing has been decided,’’ Kenya Airways Chairman Michael Joseph told the newspaper. But sources at that meeting told The Star the airline was eyeing trimming its Boeing 787-8 back to five planes and cutting its Embraer E190 fleet to ten planes.
Kenya Airways currently has nine Dreamliners and 15 Embraers – meaning a fleet reduction of nine planes.
In addition to those two aircraft types, Kenya Airways also flies a dozen Boeing 737s, including eight B737-800s, two B737-700s (both parked), and two B737-300(SF)s. There is no move to cull the Boeing 737 fleet. The overall fleet is a mix of 17 owned and 19 leased jets. Nine of the Embraers are owned while six are leased. Six of the Dreamliners are owned while three are leased.
Breaking leases might cause ripples among lessors but isn’t an insurmountable problem. With only three 787-8s leased, one would need to be sold – a tougher ask.
Consultancy says they put forward a range of options
Steer Group says its task at Kenya Airways was to develop the least-cost option for the airlines’ largest shareholder, the Government of Kenya.
“Steer’s responsibility was to advise the client on the different options for the airline’s future, providing a reasoned and quantified analysis. The possibilities considered ranged from continuing business as usual to restructuring options to complete closure of the airline,” the consultancy says. “We developed recommendations for the preferred option based on impacts on the airline, government finances, and the Kenyan economy.”
Kenyan Government plans to privatize Kenya Airways went nowhere. Instead, the Government continues to tip funds into the airline as it struggles to pay for ongoing operational costs such as salaries, aircraft maintenance, and aeronautical fees. As well as absorbing debt, the Kenyan Government is contributing nearly US$800 million in the 12 months to June 30, 2022, to keep Kenya Airways in the air.
