KQ losses drop to Sh9.9 billion as normalcy returns

Its revenue grew 76 per cent to Sh48.1 billion.

In Summary
  • The airline spent Sh11 billion on fuel, aircraft leasing Sh5.6 billion and overhead costs of Sh3.06 billion. 
  • It has been cutting its losses in the past three financial years from Sh14.4 billion reported in 2020
A KQ plane
A KQ plane
Image: FILE

Kenya Airways significantly cut its losses in the first half of the year as the global economy shed off Covid-19 ruins. 

The national carrier's losses dropped to Sh9.9 billion from Sh11.5 billion same period last year on high revenue which grew 76 per cent to Sh48.1 billion.

Speaking at the investor briefing on Wednesday, the airline's chief executive Allan Kilavuka said operations were positively impacted by pent-up demand and the removal of travel restrictions, resulting in a strong and sustained recovery.

''This increase is mainly attributed to a significant growth in passenger revenue which grew by 109 per cent, and cargo revenue which increased by 18 per cent,'' Kilavuka said. 

During the period, KQ uplifted a total of 1.61 million passengers, an 85 per cent improvement compared to the prior year's 0.87 million passengers.

This, however, remains 33 per cent lower than the pre-pandemic period of 2019. Cargo tonnage increased by 39 per cent compared to the same period in 2021, demonstrating continuous outstanding growth in airfreight services.

"The opening of borders worldwide has led to quick rebounds in some key markets. Lingering travel restrictions in some markets have limited the recovery,'' KQ chairperson Michael Joseph said. 

He said the airline could have cut losses to Sh1.5 billion in the six months period were it not for the high price of aviation fuel which has increased by over 65 per cent in the past 12 months.

According to the firm's financial report, fuel costs accounted for a significant amount of the total operation costs which rose to a four-year high of Sh57.9 billion.

The airline spent Sh11 billion on fuel, aircraft leasing Sh5.6 billion and overhead costs of Sh3.06 billion. 

The International Air Transport Association is confident global airline passenger numbers will reach 83 per cent of pre-pandemic figures in 2022, and the aviation industry's recovery to profitability will be within sight despite ongoing uncertainties.

Strong demand, lifting travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fuelling a resurgence in demand that will see industry revenues reach $782 billion, an increase of 54.5 per cent year-on-year and representing 93.3 per cent of 2019 levels.

Kilavuka said that as the industry recovers, KQ's focus is to strengthen operational resilience through innovation and diversification to deliver great and reliable services to customers.

''We have transformed the airline during the pandemic, enabling us to emerge with renewed strength, underpinned by a product, network and service that customers value,'' Kilavuka said.   

The airline has systematically been cutting its losses in the past three financial years from Sh14.4 billion reported in 2020 even as it gears toward planned restructuring.   

Early this year, KQ tapped US-based consultant Seabury Group to advise it on financial restructuring and a revival plan amid a government-backed bailout.

The national carrier needs money for the maintenance of grounded planes, payment of salaries and settlement of utility bills such as security, water, electricity and parking as well ease the effects of the virus that has obliterated global demand for travel.

Part of the key actions in KQ’s restructuring process includes the trimming of the airline’s network, rationalising frequencies and fleet and addressing the company’s high-cost structure.

Yesterday, the airline acknowledged the support given so far by the exchequer and the International Monetary Fund (IMF), saying it has achieved over 50 per cent of the targets given.

Most of the targets revolve around cutting down on operational costs and ensuring efficiency. We have already cut at least 19 per cent of aircraft leasing costs. We hope to hit the 35 per cent target by the close of the financial year,'' Kilavuka said. 

The airline continues to sink deeper in losses despite conducting a Sh200 billion restructuring that saw it convert most of its debt into equity and a government-guaranteed loan of $750 million (Sh75 billion) from the Export-Import Bank of United States (US-EXIM Bank) for the fleet of wide-bodied aircraft.

The plan conducted in 2017 was meant to push the airline bank to its wheels after reporting the highest loss in Kenya's corporate scene.

It reported a loss of Sh26 billion in the year ended March 31, 2016.

The government converted $267 million (Sh26.7 billion) of loans into a 19 per cent shareholding of new shares in the airline, while the 11 Kenyan banks exchanged unsecured loans of $167 million (Sh16.7 billion), from a total of $217 million (Sh21.7 billion), into 38.1 per cent of shares through an off-balance sheet special purpose vehicle.

Some of the Kenyan banks also provided a $175 million (Sh17.5 billion) multi-purpose loan, also backed by a government guarantee.

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