KENYA Airways has signed a $1.9 billion (Sh160 billion) financing deal with African Export-Import bank for the purchase of 20 planes. KQ which recently held a rights issue that raised Sh14 billion out of the targeted Sh20 nillion said $300 million from the Afrexim bank loan would be added to the money already raised to make pre delivery payments.
The remaining $1.6 billion will be used for actual aircraft payments. KQ which is currently implementing its 10 year expansion strategy that will entail opening of several new routes plans to buy nine Boeing 787-800s Dreamliners, one Boeing 777-300ER and 10 Embraer-190 aircraft. "Starting August we shall have an aircraft coming in every month for the next eight months," said KQ Chief Executive Titus Naikuni.
The B787 and B777-300ER deliveries are expected to start during the first quarter of 2014 and the fourth quarter in 2014, respectively. The $300 billion for pre delivery payments will be repayable over seven years while the remainder to be used on aircraft financing after the delivery will be repaid over 10 years.
Afrexim bank president Jean-Louis Ekra said the institution had opted to support KQ because the airline's plan for interconnecting Africa would be vital in increasing intra-regional trade. "Our strategic objective under out five year plan running between 2012 and 2016 is to grow intra Africa trade," said Ekra. "Air transport is the engine for sustaining intra Africa trade and tourism and the bank has committed to build strong regional African carriers."
The new deliveries under this finance agreement will help increase capacity and allow for replacement of old aircrafts. The Dreamliners will replace the 767s while the E190s will be used for capacity expansion on the African routes. KQ plans to grow its fleet from 34 aircraft to 119 by 2021, and increase its destinations from 57 to 115 during the same period.
In March KQ had advertised for request for proposals for financing deals targeting both international and local financial institutions. Ekra said that Afrexim is also keen on supporting aviation infrastructure in Africa and has initiated talks with the Kenya Airports Authority to discuss financing of the ongoing Jomo Kenyatta International airport expansion project. He revealed that the bank will meet KAA officials in the course of the week to get more information on the project before making any financial commitments.
On his part Naikuni said he was optimistic that the expansion project would be complete on time. KQ's expansion plan depends on additional space at the airport and the completion of the upcoming Greenfield terminal for its operations. Once the airport is currently overstretched and would not be able to handle more passengers if aircraft landing frequencies are increased without the expansion.
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