Kenya Airways (KQ) last year saw a more than 10-fold increase in the depreciation of its fleet from Sh214 million to Sh2.963 billion due to losses expected at disposal of old planes and the drop in value of repaired ones.
The national flag carrier’s impairment charge on owned aircraft –the permanent reduction in the value of the assets– was at a four-year high, impacting its asset base.
It says the surge in depreciation was necessitated by a planned disposal of old planes at prices below their market value, and reduction in value of planes that had undergone overhauls.
Mary Mwenga, KQ’s acting chief financial officer, told Business Daily in an emailed response that the bulk of the impairment charge, to the tune of Sh1.8 billion was related to repaired planes whose book values had increased after the overhauls but now seems to have been overstated compared to what they can actually fetch in the market right now.
Although the planes are still in use by the airline, their value, as recorded in KQ’s balance sheet, has dropped to reflect what they can be sold for in the market if the airline decided to do away with them. This, however, had no impact on their safety and fitness for use.
“In aviation, it is a normal trend for aircraft to undergo major overhauls after a certain period. These overhauls are part of regular maintenance and are essential to ensure the continued safety and efficiency of the fleet,” Ms Mwenga said.
“The impairment charges reflect adjustments based on current market valuations rather than their operational status. Regular overhauls and maintenance are standard practices in industry to extend the lifespan and maintain the value of the aircraft.”
The other Sh1.1 billion was “related to certain aircraft that the airline had intended to dispose of at lower amounts than their book values, necessitating the impairment,” Ms Mwanga added.
Disclosures from the airline reveals that this is the largest impairment on its owned aircrafts since 2020, when it incurred Sh7.037 billion in plane value loss as many of them were grounded due to global lockdowns on Covid-19 containment measures.
KQ currently has a fleet of 35 aircraft, most of which are owned but some are leased. The latest addition to its fleet is a 170-seater Boeing 737-800, which it leased from the US-based firm in February.
It typically leases Boeing 737’s, 787’s, and Embraer E190’s. Last year, it paid a total of Sh5.2 billion for the leased aircrafts in its fleet and paid a deposit of Sh6 million to Boeing for future purchases of aircrafts.
Its owned aircrafts are currently valued at about Sh58 billion as of December 2024, having accumulated a joint depreciation of Sh82.3 billion over their lifetime.
