Elias Biryabarema
5 November 2008
Kampala — The fuel price escalation crisis that peaked in July and Kenya's post-election violence in January this year shook Kenya Airways business stability, crimping its profitability by more than half and leaving the immediate growth prospects of East Africa's most robust airline uncertain.
According to the company's results announced on October 29 for the six months ending September 2008, Kenya Airlines saw its profits drop to Shs17billion (Ksh736m) from Shs44billion (Ksh1.9 billion) for the same period in 2007.
The price of fuel sharply climbed from early this year straining the budgets of airlines and by the time a barrel touched $147 in July and August, a number of airlines in the west had been forced to merge while some went belly up.
For Kenya Airways, the business environment was further soured by the primordial tribal bloodletting that swept the nation soon after the presidential elections in December 2007.
As tourists watched the bloody violence spread across the nation's picturesque rift valley where many of the attractions are located, they quickly cancelled their bookings and for well up to April this year Kenya saw it's hitherto flood of high-spending Western visitors all but nearly dry up.
Passenger traffic recovered marginally though, according to the company, leading to what it called a "paltry growth" for the period. But much of the recovery was in Africa and Far East.
European traffic actually contracted by 6 per cent, mainly due to the suspension of flights to Paris and a drawdown of capacity to Amsterdam.
"The post election violence experienced in Kenya at the beginning of the year adversely impacted the first half of the financial year which coincides with the peak season in the industry," a commentary accompanying the results published on November 3rd said. Fuel expenses for the airline nearly doubled to Ksh12 billion against Ksh7billion for the same period last year.
The company's Board lamented the results they called "much lower" than those of last year but struck a note of optimism, asserting that performance would improve in the next half a year. Kenya Airway's recent troubled performance has seen the company's stock continue hurtling down with its price on USE, sagging to Shs642 from over Shs1000 three months ago.
But even the Board's firm optimism hinges on a political environment that apparently increasingly appears fragile.
It noted in the commentary that for the economic environment to stabilise and tourists to gain the confidence of Kenya, the nation's coalition government must function well.
It's unclear whether that will happen since the pull and tug within the coalition continues to stymie the smooth functioning of state machinery.
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