Friday, June 28, 2013

■ KENYA: Kenya Airways renegotiates its MRO contracts in bid to cut costs.

Kenya Airways
Fresh from announcing its latest Financial Year results which entailed a USD92million loss, Kenya Airways (KQ) has announced further cost cutting measures aimed at returning the struggling carrier to the black within the next two years with news that it has renegotiated its aircraft MRO (Maintenance Repair Overhaul) contracts to its benefit.

Kenya Airways MRO Hangar
Kenya Airways MRO Hangar (Kenya Airways)
In a statement issued Wednesday, Kenya Airways said that, in addition to the acquisition of brand new 777-300ERs, 787s and Embraer Regional Jets, it had negotiated fleet maintenance contracts that will save it USD58.15million (KES5billion) over the next five years. The airline did not give details including names of suppliers that it has re-negotiated contracts with.

As part of fuel cost-cutting measures, Kenya Airways also plans to set up a fuel hedging company.

In its financial results, Kenya Airways stated that its fleet overhead costs for its 2012/2013 Financial Year increased to KES11.12billion  from KES9.97billion the previous year.

According to Kenya's BusinessDailyAfrica, analysts led by Citigroup project the airline to post a net loss of KES3.1 billion for its 2013/2014 financial year as higher costs continue to take their toll. While sales are expected to grow by 15.3%, Citigroup says expenses such as direct costs and net interest payments will rise to Sh118.5billion, offsetting sales. 

However, the national carrier is projected to return to profitability in the year ending March 2015 with a small net profit of KES618 million.