KENYA: Kenya Airways, Air France And KLM In Partnership - Higher Fuel Costs Reason For KQ High Losses

Air France has formally joined the Kenya Airways and KLM joint venture (JV), as the French carrier launched direct flights between Nairobi and Paris.

The new agreement, which was signed Monday, allows passengers to connect to 26 and 57 other destinations beyond Nairobi and Paris, respectively.

Air France, which merged with KLM in 2004, will operate three weekly flights between Nairobi and Paris.

The airline will fly the latest-generation Boeing 787 on this route, the Dreamliner with 30 seats in Business class, 20 in Premium Economy class and 225 seats in Economy class.

Air France, KLM and KQ customers will also reserve flights operated on a code share basis by one of the three airlines on Amsterdam and Nairobi routes following signing of the partnership.

We are back on the Nairobi and Paris route because of the growing economic ties between the two countries.

To date, we have over 80 French companies that have selected Nairobi as their regional hub and this is one of the many opportunities we are looking to tap.

Our latest route will serve to strengthen our African routes, said Air France, senior vice president Africa, Frank Legre.

The agreement allows the three carriers to conduct concerted marketing and sales activities, align and coordinate pricing of tickets as well as exchange of staff in select areas.

KLM and KQ entered into a master co-operation agreement in 1995, which has seen them share revenues on certain routes based on a pre-determined ratio after deducting expenses.

We are accelerating our offensive on the long haul flights by forging partnerships and new alliances. We are set to unveil new routes and partnerships soon said Air France, Executive Vice President, Customer Division, Anne Rigail.

Meanwhile, Kenya Airways is set to introduce a more spacious but higher-priced Economy class on its nine Dreamliner aircraft in a bid to grow its revenues.

The national carrier, known as KQ by its international code, says it will increase the recline angle and legroom on 27 seats currently assigned to Economy class and charge up to Sh10,200 more for the convenience.

KQ made the announcement Wednesday when reporting that its revenue for the nine months to December stood at Sh80.8 billion and that its net loss for the period was Sh6.1 billion.

Any time one of the aircraft is grounded for an extended period, we shall make the necessary adjustments to the first three rows in Economy, said Vincent Coste, KQ’s chief commercial officer.

Customers can book these seats for between $50 and $100 depending on the season and length of the flight.

Airlines have over the years increasingly paid more attention to business class customers who pay significantly higher than their fellow passengers on the same trip.

Offerings such as bars and lie-flat beds aimed at increasing the cabin space for this special set of passengers have, inevitably, disenfranchised those who sit in Economy class.

KQ is now looking to book extra ancillary revenue from this new offering which it says has proved successful including among its partner airlines such as KLM and Air France.

Dreamliners are the commonly used aircraft on long-haul routes such as Europe and the upcoming one to New York hence KQ’s decision to retrofit for extra comfort to woe customers.

This aircraft has 30 seats in Premier World or Business class and 204 in Economy.

At the moment, the airline charges between Sh3,100 and Sh11,780 for passengers in need of seats with extra legroom, with the cost varying depending on the length of the flight and your loyalty programme ranking.

National carrier Kenya Airways’ shareholder value has moved into positive territory riding on last year’s balance sheet restructuring that reduced its annual debt payment obligations, leaving room to revamp its operations.

KQ’s equity position stood at Sh417 million in the nine months between April and December 2017 compared to negative Sh45 billion in the year to March 2017, according to a financial report that was released.

The change in fortunes follows a complex restructuring of the business that saw Kenya Airways main creditors, 10 commercial banks and the government convert Sh44.2 billion loans into equity to save it from total collapse.

Financial results that were released on Wednesday, however, show that Kenya Airways is still a multi-billion shilling loss-making operation that produced a Sh6.08 billion loss for the nine months to December 2017.

The results do not have a comparable period because KQ has changed its reporting period from March to the calendar year.

Michael Joseph, who chairs the company’s board, said the change in reporting cycle has been done to sync the airline’s books with those of stakeholders such as travel agents, financiers and lessors.

We are now concentrated on the industrial restructuring of the business, which includes finding ways of increasing our revenues and keeping costs at a manageable level, he said.

KQ’s precarious equity position that left it with less assets than its debt load meant that if it were to be liquidated, shareholders would be left with nothing.

Kenya Airways’ total debt now stands at Sh139.6 billion compared to total assets of Sh140.1 billion.

The airline made loan repayments of Sh9.1 billion during the period under review, a significant drop from the Sh25 billion paid out in the full year to March 2017.

Despite this improvement in its leverage, the carrier posted a loss for the nine months to December mainly driven by a 14 per cent increase in fuel costs and a 20 per cent drop in customer numbers.

KQ airlifted 3.4 million passengers during the nine months to December earning Sh80.8 billion in revenues but its operating costs consumed Sh79.5 billion.

Sebastian Mikosz, the airline’s chief executive, said attention is now turning to route expansion, cost optimisation and improvement of service delivery.

Top on the list are the direct and daily New York flights set to commence in October and which Mr Mikosz expects to boost KQ’s revenues by between eight and 10 per cent.

Kenya Airways (KQ) has posted a Sh6.1 billion net loss for the nine months to December as it announced a change in its financial calendar to sync with the calendar year.

The national carrier's management has attributed the loss position to higher fuel costs and the negative impact of a prolonged electioneering period.

Fuel costs, which went up 14 per cent in the period, remain the biggest challenge to KQ's profitability.

However, the airline is optimistic of 2018's outlook amid a planned rollout of daily flights between Nairobi and New York this October, non-stop flights to Cape town and direct flights to Mauritius.

Chief executive Sébastian Mikosz said the full financial impact of the new US route will be felt in 2019, adding he expects a revenue boost of between 8 and 10 per cent.

The firm will be recalling its Dreamliner from Oman Air to serve this long haul route.

Kenya Airways will, in partnership with its European partners, roll out economy comfort class on all aircraft in the next 12-15 months as part of its strategy to increase revenues.

Michael Joseph, KQ's chairman, said Wednesday at an investors' briefing that Polish consultants are still part of the team alongside consultants from other countries, adding that focus on the Polish misplaced.



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Boeing And ANA Celebrate Delivery Of 787 Dreamliner

Boeing and ANA celebrated the delivery of the airline’s 50th 787 Dreamliner during a ceremony today at Boeing’s Everett Delivery Center.

The milestone marks yet another record for ANA as it becomes the world’s first airline to operate 50 787 Dreamliners.

“The 787 Dreamliner has played a significant role in opening up new routes into new markets, while also forming the backbone of our long-haul fleet,” said Osamu Shinobe, president and CEO, ANA. “As the launch customer of the 787 Dreamliner family, we are proud to welcome the 50th 787 Dreamliner into our fleet, where it will continue to serve our passengers with the most innovative and memorable flying experience.”

As part of efforts to expand its global network, ANA also announced plans to launch new routes from Tokyo, Narita to Phnom Penh, Cambodia in September this year and Mexico City, Mexico in February next year using 787 Dreamliners.

ANA became the launch customer of the 787 when it purchased 50 in 2004, and was the first to bring the airplane into service in 2011. The airline operates more than 11 percent of all 787s around the world today and has flown an estimated 125,000 flights with the Dreamliner.

“As the launch customer of the 787 and our largest 787 customer, we are honored to celebrate this important milestone with ANA,” said Boeing Commercial Airplanes President and CEO Ray Conner.

“ANA is a valued Boeing customer and has been a vital partner on this program. Today’s event demonstrates the strength of our enduring relationship and we look forward to introducing the 787-10 to ANA in the coming years to complete the entire family of 787 Dreamliners in their fleet.”

Already the world’s largest Dreamliner operator, ANA has an additional 33 787s on order, including the longest and newest member of the family, the 787-10. The airline also has 20 777-9 airplanes on order.

ANA recently showcased its 50th 787 Dreamliner at the Farnborough International Airshow, performing high-performance demonstration flights for thousands in attendance and wowing millions of fans around the world on the internet.

INDIA: Air India Puts 9 Dreamliners On Sale

State-owned carrier Air India has put on sale nine of its 21 Dreamliners (B787-800) to raise over Rs 7,000 crore to fund acquisition of new aircraft and also for repayment of the bridge loan availed earlier for purchasing these Boeing 787-800s. These nine planes were inducted in the national carrier’s fleet between March 2014 and June this year. Air India would also lease back these the nine B787-800 under an operating lease for a period of up to 12 years with a three-years extension option, the airline said in an Invitation of Offers document. Under a Sale and Lease Back (SLB) arrangement, the seller of an asset leases it back from the purchaser for a long-term period and continues to use it without actually owning it.

The airline has already sold and leased back the remaining 12 Dreamliners under the SLB arrangement. Air India intends to finance its aircraft through direct purchase/operating sale and lease back, proposed to use the proceeds of the facility for purchase of aircraft and repayment of bridge loan taken for acquisition of nine 787-800 planes, the document said.

The airline has fixed a reserve price of not less than USD 120 million for the planes acquired in 2015 and USD 120 million for the aircraft inducted in the fleet during 2014, it said. Under the SLB/financial lease, Air India would sell these planes to the lessor and immediately lease them back under an operating lease for a period of up to 12 years with an option to extend by three more years at a mutually negotiated price, the document said.

INDIA: Air India To Raise Rs 700 Crore Bank Loan To Pay For 6 Dreamliners

National carrier Air India plans to raise USD 110 million (around Rs 700 crore) from banks/ financial institutions to part-fund its acquisition of six Boeing Dreamliners, which are to be delivered to the airline in the next fiscal. The state-owned carrier currently has 21 Boeing 787-800 (Dreamliner) planes in its fleet.

“Air India is pleased to invite your bank/financial institution to submit a fully underwritten offer for Pre-Delivery Payment requirements (PDP) for six B787-8 aircraft,” says the tender document uploaded on the airline’s website yesterday. As per the terms of agreement signed with Boeing Company, Air India has to pay 10 per cent of the gross cost of the aircraft as advance payment 12 months prior to delivery, the tender document said.

The six aircraft are to be delivered to the carrier between April 2016 and March 2017. At present, the list price of a Boeing 787-8 is about Rs 1,400 crore. The loan would be repaid from aircraft delivery financing process, it said. As part of its fleet expansion plan, the national carrier had in 2006 placed orders with Boeing for 68 aircraft — 27 Dreamliners, 15 B777-300ERs, eight B777-200LRs and 18 B-737- 800s.

The airline has so far taken delivery of 21 Dreamliners, 12 777-300ERs, eight B777-200LRs and 18 B-737-800s. The delivery of three B777-300ERs was deferred in the wake of the downturn in the global aviation sector in 2008 as there was no “cancellation” clause in the original purchase agreement with Boeing Company. The airline has, however, now decided to take the delivery of the remaining three B777s as well but has not yet fixed any time line for their induction in the fleet.

KENYA: Kenya Airways Dreamliners Stranded In US Factory

Two Boeing 787 Dreamliners ordered by Kenya Airways (KQ) have been put in storage in the United States due to a political battle in Washington that has killed financing for the deal.

The two advanced passenger aircraft, each with a list price of about $225 million, remain stranded at a Boeing facility on the US West Coast as the troubled Kenyan carrier seeks to arrange alternative financing for the planes.

The 787s are the final two in a package of nine Dreamliners that KQ agreed to purchase from Boeing.

KQ was able to take delivery of seven other planes during the past 18 months, partly through an $835 million set of loan guarantees made by the US government-operated Export-Import Bank.

But the bank ceased operations at the end of June. Republicans in the US Congress blocked renewal of the bank's charter on the grounds that its subsidies to major corporations such as Boeing amount to anti-competitive "crony capitalism."

The holdup in delivery of the two Dreamliners represents another headache for KQ, which recently reported a $293 million loss.

The airline is trying to sell off four older Boeing-made planes to help stabilise its finances.

Acquiring the 787s could enable KQ to save money.

The new jets "feature a lightweight composite construction that boosts fuel economy."

KQ is reportedly working with Boeing to arrange new financing for the two Dreamliners through the Cairo-based African Export-Import Bank and a private company based in New York and Ireland that serves as a source of capital to the global aviation industry.

The White House has meanwhile expressed hope that Congress can reach a deal to re-authorise the US Export-Import Bank when lawmakers return on September 8 from a summer recess.