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November 18, 2018

Kenya Airways shaves loss, set to resume fuel hedging

A Kenya Airways Boeing Dreamliner 787-8 is seen inside a hangar at their headquarters in Nairobi, Kenya June 27, 2018. REUTERS/Thomas Mukoya/
A Kenya Airways Boeing Dreamliner 787-8 is seen inside a hangar at their headquarters in Nairobi, Kenya June 27, 2018. REUTERS/Thomas Mukoya/

Kenya Airways will resume aviation fuel hedging next year to cushion it from volatile global crude prices, it announced yesterday.

This came as the listed airline, reported a reduction in its half-year net loss to Sh4 billion from Sh5.6 billion over the same period last year.

Chief executive Sebastian Mikosz said the airline will renew the policy which was dropped after the carrier posted a Sh26 billion loss partly attributed to a drop in global fuel prices.

Kenya Airways continued procuring fuel at the hedged price.

He said currently, global crude oil prices are oscillating between $70 and $76 per barrel and could go up, affecting revenues.

The prices which were as low as $50 to $52 per barrel early last year have hit $76 and still climbing, significantly raising operation costs.

The company is not only exposed to fuel price fluctuations but foreign currency and interest rate risks, affecting its revenues.

Operating loss was Sh1 billion and total loss Sh2.9 billion, from Sh6.03 billion the previous year.

Mikosz attributed the improvement to increased fleets, more destinations, better networks, better fleet usage and increased cargo load.

Cargo handling has grew to 32,000 tonnes in the period under review, Mikosz added that the luggage policy is expected to bring in more revenue despite complaints from passengers.

In May, the airline reduced to one the number of free bags passengers are allowed for its intra-Africa routes and started levying charges for any extra bag.

KQ is also planning to relocate its business activities to the Jomo Kenyatta International Airport (JKIA) and is working on a partnership with Kenya Airports Authority that it expects to be finalised by the end of year.

JKIA has achieved the last point of departure status, allowing it to facilitate direct flights between Kenya and USA, after an announcement between Uhuru Kenyatta and President Donald Trump earlier this week.

The airport is now on its way to becoming an international hub, attracting business networks to the country.

“We intend to increase the fleets, KQ terminals and improve the performance of the airport as a transit hub,” said Mikosz.

The CEO said the airline is suffering repatriation of currency from several countries including Burundi, South Sudan, Sudan, Democratic Republic of Congo impacting negatively on flight frequencies to these destinations, and forcing KQ to cut back on the number of fleet to these locations or ultimately stop flying the route.

He said Angola has significantly improved on its repatriation as millions of dollars still remain uncollected in other countries.

The airline has also entered into a deal with Boeing to provide spare parts when needed for maintenance without having to buy them beforehand, a move he said will save costs.

 

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