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Kenya Airways posts sky high profit

NAIROBI, Kenya, Jun 2 – Kenya Airways (KQ) has a recorded a 73.9percent jump in pre-tax profit for the year ended March 2011, posting Sh3.5 billion.

This compares to the Sh2 billion profit recorded in the previous year.

Briefing investors on Thursday, KQ Chief Executive officer Titus Naikuni attributed the growth to route network expansion and fleet modernisation that boosted the number of flights as well as passenger numbers.

"We have relentlessly pushed our reach to new and promising markets regardless of the increasingly competitive business environment," Mr Naikuni told investors.

During the year, turnover increased by 21.3 percent to Sh85.5 billion compared to the Sh70.7 billion posted in the corresponding period.  This was a milestone for the airline, which was able to cross the $1 billion mark.

Read the Financial Statements here.

Passenger turnover stood at Sh75.355 billion versus Sh62.8 billion while cargo accounted for Sh6.5 billion while handling fees accounted for Sh1.4 billion.

The cabin factor of 69.2 percent was higher due to the high passenger traffic. Total passengers carried by the airline were three million which was an 8.5 percent increase from the previous year.

Total expenses rose by 16 percent to Sh80 billion from Sh68.9 billion largely driven by a weaker shilling, increased operations due to the new destinations and a rise in employee cost of Sh1 billion.

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The increase in operating expenses was however balanced by gains made from expanding the route network and frequencies.

"With the new routes and increased frequency we are making progressive growth in passenger loads which is good for our business," Mr Naikuni said.

A major achilles heel for the airline has been the rising cost of fuel globally. Fuel costs, excluding hedge costs, increased by Sh5.96 billion to Sh25 billion accounting for 48 percent of total expenses.

"The weaker shilling impacted fuel costs by 3.9 percent as well as increased consumption from the increased operations with the new routes," KQ Financial Director Alex Mbugua said.

As part of its expansion program, KQ plans to open eight new routes within the year to areas such as Jeddah (Saudi Arabia), Port Louise (Mauritius), Asmara (Eritrea) and Beirut (Lebanon). There also plans to increase frequencies on routes such as Juba (two), Zanzibar (ten) and two additional flights to Gaborone.

"We are still bullish. We are looking at opening new routes … meaning we have an opportunity to increase our revenues even further," Mr Naikuni stressed.

Kenya Airways has committed to buying nine new aircrafts from Boeing despite numerous delays.

The two companies have reached a settlement agreement on the delayed delivery of the nine Boeing 787-8 Dreamliners with the first aircraft expected in the fourth quarter of 2013 pushing the initial date from October 2010.

To support growth in the meantime, the airline will focus on narrow-bodied aircrafts such as the Embraer with ten expected within the year.

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With 377 pilots, KQ is also on an aggressive search for pilots to join the airline.

"There is no way we can grow as fast as we want with the current numbers," he said.

KQ also has plans to grow its cargo business by ordering B737 and B747 freighters.

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