Kenya Airways Fleet Expansion Unfazed By Expected Huge Tax Bill

Written by Kevin Mwanza

Kenya Airways, one of Africa’s leading airlines, has said it will continues with its ongoing plan to increase its fleet despite new tax legislations that could wipe out its earnings for the year as it struggles to recover from losses it posted in 2013.

Speaking at AFRAA 3rd Suppliers and Stakeholders Convention in Nairobi the airlines Director of Finance, Alex Mbugua, said the carrier will take delivery of a further 5 Boeing B787-8 Dreamliners and 3 Boeing B737-800NGs before the end of the year, eTN Global Travel News reported.

This will bring this financial year’s deliveries to a total of 10 new aircraft; 7 twin-aisle, long-haul; and 3 short- to medium-range, single-aisle jets.

The airline, which is 26.7 percent owned by Air France-KLM and 29.8 percent by the state, is however facing a $161 million tax bill through VAT being levied on aircraft spare parts and new aircraft.

Analysts say this could wipe out any expected profits the airline could make this year and further make it less competitive in the face of aggressive pricing by its rival Ethiopian Airways and Gulf Airlines which do not face such levies on their purchases and can afford to offer cheaper ticket fares.

To boost its ability to add more destinations in Africa by the end of next year, Kenya Airways intends to replace the aged B767-300ER fleet with state of the art B787s.

eTN Global Travel News however reported that Kenya Airways Board of Directors and the top managers are lobbying the government, which is the majority shareholder, to exempt them from the tax. The Kenyan Treasury has the power lift the tax burden off the airline to help it more competitive on the global market.

Under a meticulous 10-year strategic plan the airline intends to boost its fleet to 107 passenger jets  from approximately 50 at the moment.

Kenya Airways posted  a record loss of $89.7 million in the last fiscal year and is still struggling to recover from.