Kenya: KQ Defends Its Aircraft Leasing Business

Nairobi — Kenya Airways (KQ) has said that its’ aircraft leasing agreements have saved it billions of shillings in maintenance and operations costs.

The national carrier said in a statement that leasing contracts for aircraft are purely commercial business arrangements entered into by airlines and lessors worldwide.

“Lessors contracted to KQ for leasing of aircraft and engines are all renowned international companies that manage hundreds of aircraft leased to different international airlines across the world,” the national carrier said.

Currently, KQ employs two types of leases such as finance and operating leases.

“Because of the complexity and size of the lease, financiers typically prefer to use Special Purpose Vehicles (SPVs) to facilitate the finance leasing transaction. The setting up of SPVs is standard industry practice, as evidenced in relevant IATA aircraft financing literature, and is a regular practice for significant asset financing,” it adds.

According to KQ, SPVs are a long-term financial lease with an option to purchase aircraft at the end of the agreement. KQ currently has two SPVS such as Tsavo and Samburu.

Operating leases are a legal agreement between two parties, a lessor and lessee, where the lessor agrees to provide the aeroplane to the lessee (KQ) for a set period of time in exchange for regular payments called rentals or lease payments, KQ added.

“KQ deals with the following international renowned lessors; Dubai Aerospace Enterprise (DAE), AERCAP, Bank of China (BOC) Aviation, China Development Bank (CDB) Leasing, Deucalion, Macquarie, Aviation Capital Group (ACG), Goshawk, Nordic Aviation Capital (NAC), Azzora, Chorus Aviation, NAC and Montrose.”

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Currently, the firm has leased 35 aircrafts comprising 18 (finance lease) and 17 (operating lease).

In the last financial year, the airline said that it saved Sh11 billion after changing aircraft leasing agreements from fixed costs to hourly rate.

In the first half of 2022, KQ posted a Sh9.8 billion loss, highlighting its economic challenge.

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