Kenya Airways on Thursday announced that it is set to incur an additional Sh3 billion accounting loss from new aircraft sub-leasing contracts in its half-year financial statement that ended this September.
This comes after leasing of five Boeing airplanes to Oman Air and Turkish Airlines last year in a deal that left the Nairobi Securities Exchange-listed firm with a Sh4 billion accounting loss in the year ended March.
Oman Air is taking two B787-8s and Turkish Airlines is taking three B777-300ERs.
It brings the total number of aircraft seconded to the Muscat-based carrier to four while those sent to the Istanbul-based airline rises to six.
The Airline has announced it further plans to scale its capacity in its financial year to cut down on costs.
Losses at the KQ has been accounted on the airline`s leasing out aircrafts at rentals lower than that charged by the primary leasers.
This is part of the company`s effort to cut costs at a time when the company is facing slow revenue and liabilities.
The Sh3 billion loss on the new contracts is split into long-term leases that will generate a Sh2.07 billion deficit and short-term leases whose loss stands at Sh980 million.
KQ signed the deals to mitigate even larger losses it would have otherwise incurred from cancelling the contracts at a time when it could not fly the planes profitably itself.
The airline has said the contracts would reduce the airline’s fleet costs by an equivalent of Sh8.4 billion annually, indicating that sub-leasing at a loss is a lesser evil compared with maintaining a bloated fleet.