Foreign exchange losses dip Kenya Airways 2016 earnings

July 21, 2016
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The losses are also attributed to increased cost of borrowing in the period under review incurring an additional Sh2.3 billion in interest expense/FILE
The losses are also attributed to increased cost of borrowing in the period under review incurring an additional Sh2.3 billion in interest expense/FILE
NAIROBI, Kenya, Jul 21 – National carrier Kenya Airways has posted Sh26.2 billion net loss in its 2016 full year results impacted by Sh9.7 billion foreign exchange losses.

This is a marginal loss increase compared to Sh25 billion losses it made in 2015.

The losses are also attributed to increased cost of borrowing in the period under review incurring an additional Sh2.3 billion in interest expense.

Also, the movement in international oil prices during the year unfavourably impacted the Group’s fuel hedges resulting into an additional Sh5 billion in realised fuel hedges losses.

The firm however recorded a 75 per cent reduction in operating loss from Sh16.3 billion in 2015 to Sh4.1 billion in the period under review.

“The operating loss improvement of Sh12.2 billion was underpinned by a growth in cabin factor to 68.3 per cent, with an increase in passenger numbers from 4.18 million to 4.23 million, a reduction in direct operating costs, overheads and fuel and an increase in fleet costs,” said Mbuvi Ngunze KQ Chief Executive.

Ngunze says that excluding one-off impacts related to asset sales, compensation for late delivery of new aircraft, write-offs, impairments and provisions, the group broke-even at operating loss level, an improvement of Sh11 billion, while loss before tax improved by Sh2.5 billion.

The airlines revenue grew by 5 percent to Sh116 billion in the period under review from Sh110 billion in 2015 while total assets went down to Sh158 billion from Sh182 billion in 2015.

“The results were achieved in a tough aviation context, in which airlines continue to be weighed down by wild currency fluctuations, volatility in fuel prices, and a changing commodity price environment. An industry forecast by IATA indicates that African airlines will continue to be in negative profit territory in 2016, despite overall improvement in performance. In conjunction with the overall trajectory of the results, a number of other key performance indicators for Kenya Airways also showed marked improvements,” he explained.

The firm is currently working on a turnaround strategy that includes staff right sizing, and rationalising its fleet through selling off and leasing some of its surplus aircraft.

The airline in January 2016 sold two aircrafts to Oklahoma based Omni Air international at an estimated Sh14.6 billion.

An additional five aircraft have been sub-leased. The airline is however yet to sell its 30 acre piece of land at Embakasi.

The airline is set to send home up to 600 employees and has already sent home 80.

“The Government of Kenya and KLM, in their capacity as major investors in Kenya Airways, have indicated their continued strong support of the company’s operational turnaround and the capital structure optimisation process; are closely involved throughout the process and intend to remain major stakeholders in the company over the long term,” said Ngunze.

The company secured bridge financing to the tune of USD 200 million (Sh20 billion). The first tranche of USD 100 million (Sh10 billion) was received in September 2015 and the second tranche was received in July 2016.

This borrowing is supported through an on-lending agreement from the Government of Kenya as a key stakeholder.

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