KENYA AIRWAYS CLEARS THE AIR OVER MEDIA ALLEGATIONS OF CANCELLED DREAMLINER ORDERS
(Posted 04th May 2015)
Kenya Airways yesterday went on record to nip mainstream media allegations in the bud that the airline had cancelled their remaining three Boeing B787 Dreamliner orders.
Truth told, the mainstream media slept when the 07th Dreamliner was delivered over the weekend and when they caught on to the news, probably through this publication, they then wallowed in their comfort mud suggesting that the airline was in talks with either Emirates of Qatar Airways for a financial bailout.
While not asleep they got that one wrong too and no blame should be attributed to them for that as reporting on aviation issues is a complex business which requires knowledge, insight and mainly good inside contacts, something perhaps difficult to attain when merely trying one’s hand on aviation before moving on to other pastures.
The airline did issue a statement, shared with this correspondent late yesterday evening and it reads as follows:
Kenya Airways has entered into a Sale and Lease back transaction for the three B787-8 Dreamliners due to be delivered this year, with AWAS Aviation Trading Limited, a leasing company based in Ireland.
The three B787-8 Dreamliners, to be delivered in May, June and July 2015 will be leased through AWAS rather than financed on the balance sheet of Kenya Airways.
AWAS is a global leader in commercial aircraft sale and leasing with over a portfolio of over 300 aircraft for customers around the world.
Signing the deal, Kenya Airways’ Group Managing Director and Chief Executive Officer Mbuvi Ngunze said the transaction will be beneficial to the company’s balance sheet as it seeks to improve its liquidity.
“Given our current financing, we must be prudent in finding innovative financing solution while keeping with our growth ambition. The new aircraft will be important additions to our fleet as we strive to give our guests the best experience," he added.
“AWAS has proven to be a valuable, responsive and flexible business partner and we are thankful for their support. This means we meet our guest expectations with the youngest fleet in Africa as per our promise," Mbuvi said.
The first of the three aircrafts under this agreement arrived in Nairobi [on the 02nd of May] directly from the Boeing facility in Charleston, South Carolina, USA. This is the seventh of the nine Dreamliners ordered by Kenya Airways.
Sale and Lease Back is a practical fleet modernization avenue for many airlines across the globe.
That should put firmly to rest some of the wild allegations flying across the social media, triggered by known rumour mongers and naysayers relying on other rumour mongers for their information.
In regard to Kenya Airways being in talks with either Emirates or Qatar Airways, sources close to both airlines have categorically ruled that out but it is a known fact in better informed aviation circles that Kenya Airways and Etihad have held talks in the past over a range of issues aimed at closer cooperation. It was in this spirit in fact that Kenya Airways withdrew their own flights to Abu Dhabi and is now codesharing on Etihad’s daily service from Abu Dhabi to Nairobi. This goes even further as Kenya Airways offers in fact extended code shared routes from Nairobi into their regional network where besides partners KLM/Air France even an EY flight number is shown.
Etihad’s own expansion strategy is well known in aviation circles and compared to other airlines a rather unique way of forming their own Etihad alliance instead of joining one of the three other main alliances, Star, Skyteam and oneWorld. Etihad has sought and continues to seek equity participation in airlines covering certain parts of the globe, like Germany’s second largest airline Air Berlin, Air Seychelles, Jet Airways from India, Air Serbia and Swiss based Darwin Airline, Italy’s Alitalia, Virgin Australia and, albeit with a relatively small equity, Air Lingus.
All these airlines now cooperate closely with Etihad, not just through expanded code share arrangements but also using synergy effects on sales, marketing, purchasing, insurance, maintenance and training.
Notably has Etihad also been discussing a closer cooperation with KLM/Air France and as KLM is a major shareholder in Kenya Airways, it is entirely within the realm of possibility that these talks also included or at least featured a potential deal with KQ.
Nationality requirements on ownership are such that at least 50.1 percent of all issued Kenya Airways shares must be held by Kenyan individuals and corporate investors. That 50.1 percent threshold constitutes a red line and any equity participation would only be possible with limited percentage holdings, unless other foreign shareholders would sell some of their shares to another investor.
A regular reliable source close to Kenya Airways has indicated, without giving any names, that indeed some exploration on options for another deep pocketed equity partner has taken place already and is apparently an ongoing process.
There is no doubt that Kenya Airways presently is lumbered with significant losses but an airline like Etihad has in the past not shied away from taking equity and bailing out airlines with solid medium and long terms growth prospects. Successful examples for that strategy are Air Seychelles, which started turning profits from the second year of Etihad’s acquisition of a 40 percent share. Air Berlin, previously also in financial dire straits is now firmly on the road to break even after a major restructuring which was assisted by Etihad. In the German case have the unions played ball, coming to terms with the looming scenario of either consenting to restructuring or else face major job losses or even a collapse as a worst case scenario. That said however, considering the almost rabid combativeness of the Kenyan aviation unions when it comes to the national airline, apparently not inflicted though on other Kenyan carriers, would their entire mindset have to change too, before such a deal could become reality.
Returning to the fleet expansion has the same source also confirmed that a third Boeing B737-800NG SkyInterior will come on line later this year as will the two remaining Dreamliners, numbers eight and nine. That should firmly put to rest that orders have been cancelled or deferred, and what matters is that the birds are flying in Kenya Airways livery and not if they are owned or leased.
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