Aviation sector premiums drop as airlines cut their fleet size

Kenya Insurers Chief Executive Tom Gichuhi. [Jenipher Wachie, Standard]

Premium income in the aviation sector dropped by 16.1 per cent to Sh989.6 million in the first quarter of this year, new data shows.

According to the Insurance Regulatory Authority, the sector's underwritten premium stood at Sh1.18 billion in the first three months of last year.

However, this has since dropped, signaling fewer aircraft in the Kenyan air space, reckoned the Association of Kenyan Insurers Chief Executive Tom Gichuhi.

"If you don't get new aircraft coming for insurance and lose some of them either through depreciation or are not being replaced, that could be a possibility leading to the drop in premiums," Mr Gichuhi explained, adding that insurance companies might also have raised competition by undercutting each other.

National Treasury Cabinet Secretary Ukur Yatani in his budget speech for the current financial said Kenya Airways (KQ) will be required to trim its fleet as part of the airline's restructuring process.

"Kenya Airways will be required to trim its 32 networks, rationalise frequencies of flights, operate a smaller fleet, and rationalise its staff complement. I will be proposing a budget allocation to meet the costs," said Yatani.

KQ has a total of 56 destinations, with 46 of them within Africa. It is not yet clear if KQ has since reduced its fleet as part of the restructuring process.