Kenya’s national airline owns 20 airplanes out of its entire fleet of 40 planes. The information has emerged in a letter from the Kenya Airways chief executive’s office to staff. Besides the 20 fully owned planes, KQ has completed payments for 3 aircrafts through a financing arrangement and it continues to pay for the remaining 17 aircrafts.
KQ’s executive defended the decision to lease most of its aircrafts, as the new move in airline business is to lease planes for periods of up to 12 years. Lease agreements allow firms to capitalise on the limited financial resources by investing funds in network expansion instead of acquiring airplanes at huge costs.
“This allows us to optimally use our limited financial resources for other investments such as network expansion as opposed to buying the aircraft, which would mean significant cash outlay. This may not be tenable for us as a company,” said the letter.
KQ refuted claims that it had reduced its New York flights to 3 trips a week. The airline says it has adopted a seasonal cycle for the Nairobi-New York route that will have 5 flights in low season and 7 flights in high season.
Often times, network expansion means an airline may incur losses for months or a year as it establishes its footing in the new route. Kenya Airways’ new link to New York is not yet profitable. The firm’s executive anticipates that the trend will continue for at least 12 months before they break even.
Details in the letter reveal that the contentious issue of outsourcing staff persists. The airline’s executive is opposed to converting outsourced staff into KQ’s employees, as it will significantly increase staff costs. On the contrary, the firm’s workers union continues to push for outsourced employees to be absorbed into the company.
Kenya Airways’ management assured its staff members that it is open to negotiate with members of the workers union in order to reach an amicable agreement. The company also stated that none of its employees would lose a job in the event that the planned merger with JKIA goes through.