Kenya Airways has signed a letter of intent for ten Embraer 190 regional jets at the Parish Air Show as the carrier moves forward with its expansion plans.
Kenya Airways signed the letter of intent – subject to a final agreement – on Monday. Under the terms of the agreement, the first E190s would be delivered in the second half of next year. The carrier has options for an additional ten E190s.
It is estimated that the deal is worth approximately 40 billion Kenyan shillings (US$435 million) at list prices.
“As we continue to focus on the expansion of our network with longer routes from our hub in Nairobi, the acquisition of new Embraer 190s is key to our growth strategy,” said Kenya Airways’ managing director Titus Naikuni in a statement. “The E190 jet fits well with our expansion strategy, giving us an opportunity to expand our network and increase our frequencies.”
Kenya Airways already has five E190s on order and received its second E190 on June 1. The first E190 arrived on schedule in Kenya on January 4, landing at Jomo Kenyatta International Airport. It is used on medium to long range African flights while the second aircraft is dedicated to southern and central African routes.
The two E190s are being leased from US-based leasing company Jetscape, for a period of eight years. Financing was provided by the Brazilian export credit bank, BNDES, under Jetscape’s existing financing facility.
“With our route network expansion firmly on course, the addition of a new aircraft into the fleet is quite timely,” said Naikuni. He added that the increase in capacity had been necessitated by growing regional passenger and cargo demand and a rapidly expanding route network.
“The Embraer 190 is a high-tech regional jet fitted with the latest avionics and a full in-seat IFE system. It will bring to our fleet a still higher level of technological improvement, helping lower maintenance and operational costs and providing the customers excellent cabin comfort in a true dual-class arrangement of 12 business class and 84 Economy seats”, Bram Steller, Kenya Airways Chief Operating Officer said in January.
The airline also operates five E170 Long Range jets. “The combination of the E170 and E190 in our network will offer greater flexibility in right-sizing the aircraft to meet route demand, using the same crew and ensuring consistent, high comfort for our passengers,” Naikuni said.
With the delivery of the E190, Kenya Airways total fleet now stands at 32 with four Boeing 777-200ERs; six 767-300ERs; five 737-800s; four B737-700s; six 737-300s, five E170s and two E190s.
Kenya Airways is planning to open at least eight new routes this financial year as it plans to grow passenger numbers, according to Business Daily Africa. Some of these routes include Ouagadougou in Burkina Faso, Jeddah in Saudi Arabia and Beirut in Lebanon. Other routes in the pipeline include Abuja in Nigeria, Tanzania’s Kilimanjaro, Port Louis in Mauritius and Asmara in Eritrea.
Yesterday Kenya’s investment secretary said the government has set aside 5 billion shillings (US$54.4 million) to take up its shares in an expected cash call by Kenya Airways.
Esther Koimett said although the government is selling off assets in various sectors from agriculture to banking, keeping its 23 percent stake in the airline — one of Africa’s largest and 26 percent owned by Air France-KLM — was a matter of national interest.
She said the government wanted to keep the stake for strategic reasons. The money for the stake had been set aside for the fiscal year running from July to June.
“There are some institutions which government sees some strategic value in remaining as a shareholder, and remember we only have a 23 percent shareholding, so it’s still a private entity,” Koimett told Reuters by phone.
Kenya Airways said in February it planned to raise capital to fund expansion, but has so far has neither given details of the amount it plans to raise nor the mode to be used.
The airline said this month it was not yet ready to share details of the fundraising plans.
Ranked as one of Africa’s largest airlines alongside Ethiopian Airlines and South African Airways, Kenya Airways fared better than its rivals during the global financial crisis, thanks to its strategy of serving as a hub for travellers to and out of Africa.
Should the airline opt to raise the funds through borrowing instead of a rights issue, the government will re-allocate the funds it has put aside for other projects, Koimett said.
“If they go a different route… we will release those funds to something else. It is just that in the event it happens we need to be able to take up our rights,” she said.