TURBULENCE

KQ cuts half-year loss to Sh11.5bn

Turnover drops nine per cent to Sh27.3 billion.

In Summary

•This year's loss is however a reduction from Sh14.4 billion posted in a similar period last year.

•Management pegs the reduced loss to cost cutting measures mainly on financial spending and fleet ownership.

Kenya Airways planes at JKIA.
Kenya Airways planes at JKIA.
Image: DOUGLAS OKIDDY

Kenya Airways has reported a Sh11.5 billion loss for the half year to June 2020, as chief executive Allan Kilavuka calls for continued financial support to save the airline.

Turnover during the period dipped nine per cent to Sh27.3 billion compared to Sh30.2 billion same period last year, mainly on reduced passenger numbers in the wake of the Covid-19 pandemic which continues to restrict global and domestic air travel.

The drop in revenues come with a 10 per cent reduction on the cabin factor (a measure of the capacity utilisation) which went down to 56 per cent from 68 per cent.

The current loss is however down from Sh14.4 billion posted in a similar period last year which management attributes to reduced costs mainly on financial spending and fleet ownership where the airline negotiated for amendments in its aircraft lease contracts.

Operating costs closed the six months at Sh34.6 billion. Management says it saved Sh1.7 billion in renegotiated lease deals, and Sh155 million from reduced spending on staff after sending part of its employees on leave.

Kilavuka said the national carrier which is operating on a negative equity, simply meaning it is insolvent, needs financial support in its journey to returning to profitability.

Its total assets are currently valued at Sh153.3 billion against a total liability (non-current and current liabilities) of Sh227.2 billion.

“It is obvious we need financial support from our principals,” he said during an investor briefing yesterday, “We are not making profit but I can assure you we are more productive because of the efforts by management and the Kenya Airways family.”

During the period under review, passenger numbers reduced to 900,000 from 1.1 million in a similar period last year , and 2.4 million in 2019.

Cargo volumes however increased 33 per cent to 29.9 million tonnes compared to last year's 22.5 million, a business segment that most airlines leveraged on during the pandemic when passenger business has remained low.

KQ, as it is know by its international code, has been hurt by restrictions in key destinations which has seen it cut frequencies of its flights.

It has reduced its flights to China to twice a week from seven, leading to an 87 per cent drop on passenger numbers it flies.

Flight suspension to India and the red-listing of Kenya by the UK has cost KQ 86 per cent and 87 per cent of its passengers. The European union's restriction of entry for Africa nationals has seen a 94 per cent decline in passengers.

Most KQ's revenues however come from the African routes (50 per cent) followed by long-haul flights abroad (40 per cent) while the domestic market contributed between nine and 10 per cent of the airline's income, according to management.

It is banking on partnerships, mainly code sharing agreements,reduction on cost and a possible resumption to full operations (post-Covid), to boost its business and help turnaround the carrier which has remained in losses for the past seven years.

Its net loss for the financial year ended December 2020 nearly tripled to Sh36.2 billion from Sh12.98 billion posted a year earlier, with year-on-year losses leaving management in a precarious position even as competitors continue to expand.

Yes I can say our current financial position is precarious but we have a number of strategies and partnerships with airlines and non-airline businesses to grow business,” Kilavuka said.

Kenya Airways chairman Michael Joseph said:”We have a tough period going forward but we remain a strategic asset for the country. Hopefully in the next 12 months we will see light at the end of the tunnel.