25 June 2014

Kenya: Profit Turbulence Not Over Yet for KQ

Nairobi — Kenya Airways (KQ) has recorded a loss for a second year in a row, but managed to reduce it by 57 percent for the full year ending March 2014 compared to last year.

The company made a loss of Sh3.4 billion after tax for the full year, down from Sh7.8 billion it made last year.

CEO Titus Naikuni said the airline recovered about 70 percent of operating loss from Sh9 billion last year to Sh2.7 billion giving impact to its income statement.

Direct operating costs dropped to Sh75.3 billion from Sh77.2 billion due to reduced fuel prices and focus on what he termed as procurement savings in maintenance contracts.

"KQ recorded improved performance in the financial year 2013-2014 driven by among others stabilisation of the Eurozone economies, favourable prices of jet fuel and stable business environment in Kenya in the first half," Naikuni said.

The national carrier however says it also faced the challenge of VAT issues, with the Kenya Revenue Authority (KRA) at the moment owing it over Sh1.5 billion in VAT refunds.

In the first half of the year ending September 30, 2013 the airline posted Sh548 million pre-tax profit from Sh6.5 billion loss recorded over the same period last year.

However in the second half, the airline saw losses mainly due to reduction of passenger revenues.

The main contributors to a drop in passenger numbers included the fire incident at Jomo Kenyatta International Airport in August last year, the September 2013 terrorist attack at the Westgate Mall in Nairobi and travel advisories against Kenya.

"The security situation in Kenya remains a concern and this has negatively impacted on traffic especially from Europe. Measurers are being taken by the management to rationalise capacity in the affected markets," Naikuni said.

The airline made some adjustments to capacity in the African region following the addition of Livingstone in Zambia and Blantyre in Malawi.

However market realities including civil unrest among other challenges necessitated the suspension of services to N'Djamena, Libreville, Bangui, Ouagadougou and Cairo.

KQ's domestic market registered a 16 percent growth in capacity from the introduction of additional two day flights to Kisumu as well as re-launch of its Eldoret operations.

The total capacity offered by the airline in terms of available seat kilometres stood at 14.1 million representing a 1.8 percent growth.

The volumes of cargo carried grew by 2.1 percent compared to prior year following the rollout of intra Africa freighter operations after the conversion of two of the B737-300 from passenger airplanes to freighters.


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