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KQ posts Sh1.4b after tax profit

NAIROBI, Kenya Nov 5 – National carrier Kenya Airways (KQ) has posted an impressive 67 percent growth in after tax profit for its half year ended September 30, 2010.

The airline’s profit after tax advanced to Sh1.4 billion during the six months compared to Sh860 million posted during the corresponding period in 2009.

Releasing the results at an investor briefing on Friday KQ Group Financial Director Alex Mbugua attributed the positive results to increased passenger and cargo operations that saw turnover rise by 23.1 percent to Sh41.2 billion during the period.

"We are out of the doldrums. Sh41.2 billion we believe will be the highest six-month performance in this part of the region and we are proud about that," Mr Mbugua told investors.

According to the International Air Transport Association (IATA) the global aviation industry is on a steady rise to recovery as effects of the global economic crisis wear off and airlines report profits.

International premium passenger traffic has increased by more than 10 percent each month from May to August, while international passenger traffic climbed 10.5 percent in September from a year earlier.

Capacity offered into Europe registered a 5.3 percent growth. The Middle East, Far East and Asia regions shrunk by 5.3 percent despite the introduction of Muscat flights via Dubai. This was largely due to the operation of the smaller B767 and B738 compared to the larger B777 that operated in prior year.

The highest seat kilometre increase was registered in Southern Africa region at 26.3 percent.

This was due to additional frequencies into Johannesburg during the World Cup, Harare and Lusaka together with the additions of N\’Dola and Gaborone into the network.  In the domestic front, capacity grew by 10 percent.

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During the first six months, KQ embarked on a strategy to cut down expenses especially fuel hedge costs. In 2009, fuel hedge costs had a negative effect on the airlines profitability when crude oil prices dropped drastically.

Mr Mbugua said KQ had renegotiated its tenure on hedges from a previous five to six years to two years.

"We revised our hedging policy in such a way that the tenures are much shorter with a maximum of 24 months as well as smaller volumes," he said.

KQ Group Managing Director Titus Naikuni told investors that: "The performance would have been better had the airline been able to expand as fast as I would like."

Airplane delays have particularly played a large part in its slow growth outside Africa.

He said Boeing, who had planned to deliver nine 787 airplanes in October, had revised the delivery date to May 2013.

"There is a challenge with wide body aircrafts which is really limiting our growth capability," Mr Naikuni said.

The airline has an option to acquire A330 planes from Airbus, but Mr Naikuni said it posed a whole set of other challenges.

"We talked with our pilots and engineers who told us we would have to re-train all of them to be able to operate the aircrafts," he said adding they had an order of nine aircrafts with an option of an additional four aircrafts.

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He added that congestion at the Jomo Kenyatta International Airport and costly landing fees was also hampering the expansion of major routes.

In future, KQ plans to open up new routes with a focus on Africa.

Mr Naikuni said he expects the stellar performance to carry through into the second half and 2011.


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