Turbulent half year punches hole in KQ bottom line

November 13, 2014
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Kenya Airways Group Managing Director Mbuvi Ngunze. Photo/ FILE
Kenya Airways Group Managing Director Mbuvi Ngunze. Photo/ FILEs

, NAIROBI, Kenya, Nov 13 – Kenya Airways has posted an after tax loss of Sh10.4 billion in the half year ending September 2014 which the carrier attributes to the challenging business environment in the period.

Loss before tax was at Sh12.4 billion shillings compared to the prior year’s profit of Sh548 million, despite an increase in turnover by five percent compared to the previous year.

Speaking during the release of the financial results, Group Managing Director Mbuvi Ngunze indicated that the fire tragedy at the Jomo Kenyatta International Airport (JKIA), travel advisories following the Westgate attack, the security situation in Mpeketoni and the Ebola outbreak in West Africa negatively impacted its passenger flow thus affecting its revenue generating capacity.

“This is a continuation of the trend from last year, following the fire at the hub airport JKIA and regional insecurity leading to reduced travel into Kenya. The trend continued into the first half of the year leading to travel advisories being issued by various countries,” he stated.

“These had a negative impact on major traffic flows into the region. The situation has been further aggravated by the Ebola pandemic which led to the suspension of our flights to Sierra Leone and Liberia in August.”

He however stated that a raft of measures that include the deployment of new fuel efficient fleet, improved customer service and improved infrastructure at the airport have been put in place to mitigate the situation.

“We have increased capacity obviously at a time when there is turbulence in the market and you have seen the operating context that we are in. When I look at our portfolio, it is reasonably balanced; we have a good exposure to Africa, we have a good exposure to Kenya, we have a footprint into Europe and Asia that seems to be balanced so we have to grow in that context. What I am looking for is actually a balanced growth into all those areas,” he pointed out.

He said that cargo tonnage uplifted within the six months grew by 8.4 percent following increased sales effort and the rollout of freighter destinations within Africa.

He explained that the direct operating costs increased to Sh42.17 million and that this was a 13 percent increase while fuel costs remained the single largest driver at 35 percent of total operating costs and grew by 11 percent.

During this period, the overheads also increased by Sh2.5 million compared to the prior and this was mostly driven by increased manpower and marketing costs aimed at supporting the renewed fleet and expanded networks.

The Group’s Finance Director Alex Mbugua further stated that the airline has hired a transaction adviser to review the company finances, particularly with a view to restructure short into long term capital.

“Our long term debt position as at September 2014 is Sh95 billion compared to Sh41 billion short term. Due to this we have retained a financial advisor and the board approved the appointment yesterday (Wednesday). One of the key objectives will be looking at the optimization of our capital structure,” he said.

He stated that the airline is also expecting a VAT cash refund of close to Sh2.5 billion in 2015 from the government to reduce its borrowings.

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