KQ defends its aircraft leasing business

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NAIROBI, Kenya, October 5 – Kenya Airways (KQ) said its ‘ aircraft leases have saved it billions of shillings in maintenance and operating costs.

The national carrier said in a statement that aircraft leases are purely commercial business agreements entered into by airlines and lessors around the world.

“The lessors under contract with KQ for aircraft and engine leasing are all well-known international companies that manage hundreds of aircraft leased to different international airlines around the world,” the national carrier said.

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

“Due to the complexity and size of the lease, financiers generally prefer to use special purpose vehicles (SPVs) to facilitate the leasing transaction. The establishment of SPVs is standard industry practice, as evidenced by relevant IATA aircraft financing documentation, and is common practice for the financing of large assets,” he adds. .

According to KQ, the SPVs are a long-term 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 a lessee, in which the lessor agrees to provide the aircraft to the lessee (KQ) for a specified period of time in exchange for regular payments called rent or lease payments. rental, KQ added.

“KQ deals with the following internationally 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.

Currently, the company has leased 35 aircraft, including 18 (finance lease) and 17 (operating lease).

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In the last financial year, the airline said it saved 11 billion shillings after changing aircraft leases from fixed costs to hourly rates.

In the first half of 2022, KQ recorded a loss of 9.8 billion shillings, underlining its economic challenge.

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