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Kenya Airways flies back into profit

NAIROBI, Kenya Jun 4 – National carrier Kenya Airways has returned to profitability with a 147 percent increase in pre-tax profit for its full year ended March 2010.

During the year, the airline posted a profit of Sh2.67 billion compared to the previous year where it recorded a Sh5.66 billion loss.

Speaking at an investor briefing on Friday, KQ Group Finance Director Alex Mbugua attributed the recovery to stable foreign exchange and steady recovery in the aviation industry.

“The strong US dollar and relative weakening of the Kenya shilling had a positive effect on foreign currency denominated revenues when reported in Kenya shillings,” Mr Mbugua said.

The average exchange rate for the period was at Sh76.67 per US dollar compared to Sh71.23 recorded the previous year.

During the period, turnover declined by 1.5 percent to Sh70 billion from Sh71 billion mainly due to an increase in overhead costs that were up by Sh3.4 billion. Sh2.1 billion of the increase was attributed to salaries and allowances.

Wages during the year totaled Sh10.17 billion up from Sh8 billion.

Kenya Airways Chief Executive Titus Naikuni said the company would employ a number of cost-control measures to bring it down.

“The whole area of manpower costs is becoming a challenge for us because if you are spending about 65 percent of your overheads on salaries it’s challenging so we have got to find ways to make sure we control it,” Mr Naikuni said.

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The impressive results have given KQ the confidence to consider introducing nine routes in the 2010/2011 financial year. The routes include Jeddah, Rome, Lome, Luanda and Juba (Monday) among others.

The nine routes will add to the already impressive 49 destination the airline flies.

Along with the new routes, KQ plans to increase flight frequencies on a number of routes where it sees potential. It has already lined up triple daily flights for Kigali and Johannesburg as well as additional flights to Bujumbura.

“We still believe Africa is where our mainstay is,” Mr Naikuni said when asked where he saw potential growth.

But even as the airline plans to increase its flights, it is still dogged by challenges in its fleet modernisation efforts.

KQ had ordered nine B787 Dreamliners from Boeing due to be delivered in 2010 but the aircraft manufacturer has handed a three-year delay to that delivery.

“Five B787 are currently undergoing test flights but the performance data is not ready. The talks we have had with Boeing indicate that those new aircrafts may be delivered in 2013,” Mr Naikuni said.

Kenya Airways has already entered into negotiations with Airbus for nine A330s due to the ongoing delays.

“In the event Boeing does not meet our expectation fair enough we will go to Airbus,” he said.

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The Board of Directors has proposed a dividend of Sh1 per share, which is the same as last year representing a total dividend payment of Sh462 million.

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