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Kenya Airways moves to hedge against fuel price as part of cost cutting measures

Kenya Airways moves to hedge against fuel price as part of cost cutting measures
  • The aim of the plan is to hedge prices for 35% of Kenya Airway's fuel needs.
  • This is an important cost-cutting measure, as fuel accounts for a quarter of the airline's expenses.
  • Kenya Airways has recently been implementing various cost-cutting measures in a bid to reverse a nine-year loss making streak.

The Chief Executive Officer of Kenya Airways, Allan Kilavuka, said the company's board of directors has approved a plan aimed at hedging prices for 35% of the airline's fuel needs.

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The CEO explained that this is part of the airline's cost cutting measures, adding that talks are already ongoing with the African Airlines Association with regards to bulk fuel purchases.

Recall that the airline recently hired Seabury Consulting (a subsidiary of Accenture) to help with loan restructuring and figuring out measures for cutting down operating costs. Bloomberg quoted CEO Kilavuka to have said that “this is the last shot at making sure that we have a concrete, measurable, realistic structure that will be successful for the airline... We will look for counter parties when the fuel price stabilises and determine how much of our fuel we want to hedge so that we mitigate against the volatility.”

The national carrier has been struggling financially since 2012 when it last reported a profit. Over the past nine years, it has reported losses, a situation that was exacerbated by the COVID-19 pandemic.

The company has also been heavily dependent on government bailouts, with the Kenyan Government disclosing earlier this year that it would inject the sum of $176 million in the struggling airline.

In the meantime, the cost-cutting measures so far adopted by Kenya Airways are already yielding results. Business Insider Africa reported yesterday that the airline reduced its net loss for FY 2021 by 56.58% down to $130.5 million (Sh15.8 billion), from $313.2 million (Sh36.2 billion) in 2020.

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