KQ Chief Executive Officer Mbuvi Ngunze says the drop was attributed to short term financing challenges, foreign exchange loss of Sh4.8billion and a one off restructuring cost of Sh4billion.
“During the period under review, the Kenya shilling weakened further against the US dollar with the average exchange rate to Sh98.76 per US dollar compared to prior year’s average of Sh87.68 per US dollar. This in addition to other currencies that weakened against the dollar, resulted in a foreign exchange loss Sh4.8bn compared last year’s loss of Sh1.2billion,” Mbuvi explained.
The increase in the loss is despite huge improvement in operating fuel costs which dropped by 37 percent from Sh21 billion to Sh13 billion.
Fuel costs saw operating losses reducing by close to Sh8.2 billion from Sh10.4 to Sh.1billion.
“We are excited the savings we have made in our operating costs. We have managed to save over Sh8 billion from an operating loss of Sh10.5 billion half year 2014 to Sh2.2 billion,” said KQ Group Finance Director Alex.
Going forward, Mbugua the airline plans to stop fuel hedging. Like other global airlines, KQ has been using fuel hedging to protect the company from global oil volatility.
However, the airline lost over Sh7 billion last years after a sudden huge drops in the cost of fuel in Kenya and across the globe.
Starting next week, the airline plans to embark on a turnaround plan that will involve converting half of the short term debt of Sh25 billion to long term debt among other initiatives.
“We are looking at talking to our banks and having some of our short term loans changed to long term, say up to seven years because as you all know, short loans are very expensive yet we need financing. I am glad for the support we have received so far,” Mbugua said.
At the moment the KQ long terms debts stands at Sh115 billion while short term loans stand at Sh52 billion with Sh25 billion coming from local banks.
Ngunze says the turnaround of Kenya airways is not going to happen overnight given the financing environment and government ability to inject additional capital, but it will happen.
“Rome was not built overnight,” he said.