KQ, Kenya’s flag carrier has been in the news more for its precarious position and a painful turnaround effort. As rationalization of the business enters the final lap, chief executive Allan Kilavuka and the shareholders are seeing the proverbial light at the end of the tunnel. Kenya Airways is “bullish” about the future as restructuring gains set in.
Kenya Airways expects to “bank” the benefits of an ongoing restructuring exercise in the coming months, as an ongoing fleet and network rationalization effort come to a conclusion. Full buoyance is expected by 2024 when the full benefits of the multipronged exercise, whose focus is an across-the-board reduction of the unit cost, are expected to manifest.
Speaking earlier today on the sidelines of the carrier’s 46th AGM that was held virtually, Chief Executive Allan Kilavuka said the network is being optimized and the fleet in service was also being rationalized to make sure it is “fit for purpose.” Frequencies will be shuffled with some destinations seeing a reduction while others will gain additional frequencies. “We are restructuring the business by reducing our unit cost so that we are competitive.”
Aircraft ownership costs, which constitute 30% of the cost base, were a particular target, and negotiations with lessors for the early retirement of leases on some aircraft were at various stages. KQ has 12 aircraft on lease and of these, two 737’s and a pair of Embraers whose leases are maturing will be returned to lessors.
“We are in the middle of negotiations with our lessors, on some we are closing and, on the others, we are making good progress. We hope we can close this by July 31, so that we can bank the benefits from the concessions we have been able to secure,” Kilavuka said.
Kilavuka said ways of reducing other structural costs, notably distribution and ground handling were also on the radar but this would be done without compromising the product. Staff reductions are not envisaged for now because the necessary manpower cuts were implemented at the peak of the Covid-19 crisis in 2020.
“We have a good basis for growth and efforts will now focus on increasing staff productivity, we are confident the restructuring process will have come to a conclusion by 2024,” Kilavuka said adding that he was “bullish” about prospects. Revenues for this year’s June-August peak season are projected at 5% above the comparable period for 2019, signaling a positive pitch. In March, the airline reported that the net loss had been trimmed 56.58% from $313.2 million in 2020, to $130.5 million in 2021.