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KQ projects decline in profit

NAIROBI, Kenya, Feb 2 – National carrier Kenya Airways (KQ) has cautioned that it might record a decline in its projected profits for the year ending March 31, 2009.

In a statement, KQ Chairman Evanson Mwaniki said on Monday that the airline projects its profits would be 25 percent lower than the Sh5.5 billion recorded during the same period last year.

“However, the (Board of) Directors at this time expect Kenya Airways to remain profitable although at a lower level compared to the previous year,” said the optimistic chairman.

Mr Mwaniki explained that KQ had hedged part of its fuel consumption at prices higher than the market, and this coupled with the weakening of the Kenyan shilling against the US dollar would impact negatively on their profitability.

“The benefits that accrue from the decline in jet fuel prices are being offset by the hedge costs, thus impacting on the profitability,” he explained.

The aviation industry around the world is currently facing major challenges due to the ongoing global financial crisis and many carriers have already warned that they might not break even this year.

The International Air Transport Association has predicted that globally, airlines are likely to make a combined loss of $5 billion in the 2008/2009 financial year and a three percent passenger traffic decline in 2009/2010.

Closer home, the national carrier last year had to grapple with the negative impacts of the post election violence, and a strong shilling against the US dollar magnified the drop in its profitability.

The impact of these factors was reflected in the first half of the year, which showed a drop of Sh1.2 billion in KQ’s profits.

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This warning came a few days after the airline announced in its operation results for the third quarter ended December 31 2008, that the additional flights to Guangzhou China, the daily Lusaka night-time flights and increased frequencies to Lagos had resulted in a seven percent growth in seat kilometre capacity (which is the distance flown times the number of seats available to passengers).

“In the European region capacity went down by three percent below the prior year driven by the downgrade of the larger B777 flights to the B767 on the Amsterdam route, despite increased direct operations to London. Capacity into the Northern Africa region decreased by six percent as a result of reduced trips into Djibouti through Addis Ababa,” a statement from the carrier said.

Passenger uplift in many African countries particularly the South and Western African regions went up due to what the company said was a positive uptake of increased capacity to the region.

Cargo volumes uplifted at 14,006 tonnes reduced by 14 percent, mainly due to the response to capacity cutbacks on Amsterdam and Mumbai operations.

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