Monday, June 24, 2013

■ KENYA: Kenya Airways considers setting up own fuel hedging firm.

Kenya Airways
Kenya Airways (KQ) is considering setting up a fuel procurement company as part of extensive measures aimed at stemming mounting losses incurred over the past two years. The Kenyan national carrier recently announced a USD92million loss for its 2012/13 Financial Year which it blamed on "harsh economic and geopolitical conditions" coupled with a global economic slowdown and volatile global oil prices.  

 AFRAA Fuel Negotiations
The 2013 AFRAA Fuel Negotiations
According to The Star, Kenya Airways CEO, Titus Naikuni, discussions regarding proposals for a fuel hedging company in which KQ would cut out as many middlemen as possible, are under consideration with Jet A1 accounting for an average 40 per cent of its direct costs each year.
"We are looking at the possibility of starting our own fuel procurement company," KQ chief executive Titus Naikuni said at an investor briefing held on Friday in Nairobi.
Overall, the airline said that fuel costs had constituted 38.5% of its total operating costs compared to 38.2% in 2011/2012 with the average cost of jet fuel per gallon in US cents having increased by 5% compared to last year. In its year end report, Kenya Airways stated it had spent USD480million (KES41.3billion) on fuel in 2012/2013 compared to USD470million (KES40.7billion) in 2011/2012.

With record fuel prices the world over, African carriers have had to bear the full brunt so much so that the African Airlines Association's (AFRAA) has set up a communal Fuel Procurement Initiative to help African airlines acquire fuel at more competitive prices by using economies of scale to help drive down the average cost per litre.