Kenya Airways records Sh7.8bn net loss as passengers reduce

 Kenya Airways chief executive officer Titus Naikuni (right) and group finance director Alex Mbugua at the investors’ briefing during the release of the company’s performance results for the financial year ended March 31, 2013. The event was held at the Intercontinental Hotel in Nairobi yesterday

 

 

By CHARLES WOKABI cwokabi@ke.nationmedia.com

Friday, June 14  2013

In Summary

• Company management attributes the performance to the Eurozone crisis and the issuance of travel advisories by key market sources
• National carrier made a Sh1.6 billion after-tax profit over the same period last year

Kenya Airways recorded a Sh7.8 billion net loss for the 12 months through to March 2013 on low passenger numbers and loss on currency exchange.

The national carrier recorded a Sh1.6 billion after-tax profit over the same period last year.

Management attributes the performance to the Eurozone crisis and the issuance of travel advisories by key market sources which led to a drop in passengers coming into the country. In 2009, the airline reported a Sh4 billion loss on account of oil hedging.

Addressing investors on Friday, KQ chief executive officer Titus Naikuni said the company took a beating from high fuel costs  and the unstable political environment in Africa experienced in the year. Last year, Ivory Coast and Mali were in turmoil forcing airlines to abandon scheduled fights to the two countries.

“The year was characterised by harsh economic and geopolitical conditions that adversely impacted on the performance of the company. The situation was worsened by the Eurozone crisis,” Mr Naikuni said.

“We hope to rebound in the next year as the political and economic environment improves.”

In a year that saw about seven airlines close down, KQ reported a first-time operating loss of Sh9 billion, down from the Sh1.3 profit recorded the previous year. This means the income the company generates from ferrying passengers and cargo is not enough to cover for the costs incurred providing the services.

Revenues dropped 8.4 per cent from Sh107.8 billion in 2012 to Sh98.86 billion in the year under review. Passengers declined by 3.6 per cent to 9.5 million.

Mr Naikuni said the airline incurred huge costs in the retrenchment exercise which saw over 800 employees leave the company in the past year.

As part of its come-back strategy, the company plans to establish its own fuel procurement firm through which it will buy fuel. The move, Mr Naikuni says, is meant to cut the additional cost the company incurs buying fuel from other companies.

“We spent more than Sh41 billion on fuel in the past financial year. It will be better if we are buying fuel from our own company so that the margins end up in the group’s books,” Mr Naikuni said.

Additionally, the company is considering putting up a hotel to reduce the costs incurred in accommodation of staff and passengers when flights delay.

Among other cost-cutting measures adopted is “reducing over-catering” where the company will cut the amount of foods and drinks offered to passengers.

“We expect to receive our first Boeing 787 Dreamliner plane in the first quarter of 2014. The plane will be the biggest in our fleet and will replace the aged B-767 aircrafts,” Mr Naikuni said