17 November 2017

Kenya Airways Costs Cut Help Narrow Half-Year Loss to U.S.$37 Million

Kenya Airways has narrowed its half-year net loss to Ksh3.8 billion ($36.7 million) compared to Ksh4.8 billion ($46.2 million) for a similar period in 2016, on reduced costs.

The national carrier's operating profit for the six months ended in September rose by 52 per cent to Ksh1.44 billion ($13.9 million) from a year earlier.

The airline reduced its overheads by 8 per cent to Ksh5.2 billion ($50 million) in the period, which saw its revenues decrease by 0.4 per cent to $526 million.

"We have kept our fleet costs in check. Going forward, we look to grow our routes strategically. We shall be extremely cautious about our cash spending," chief executive Sebastian Mikosz told investors at a briefing in Nairobi on Friday.

Passenger numbers grew by 3.3 per cent to 2.31 million with intra-Africa traffic improving by 6.7 per cent. However, Kenya's political uncertainty had had a dampening effect, Mr Mikosz said.

Restructuring

KQ shares were suspended from trading at the Nairobi Securities Exchange on Wednesday for two weeks to allow for listing of new shares after the company completed a $2 billion debt restructuring with some loans having been converted into equity.

"The capital optimisation is done. It was a decision based on compromise. As KQ chairman, I will be managing a bunch of bankers and government people. Will that be easy? I don't know," said Michael Joseph on Friday.

"We're not going to do stupid things going forward. We'll learn from our mistakes. Our key focus is growing sales and keeping a lid on costs. We have a good team now."

The National Treasury and 10 local banks have converted their debt, worth more than $442 million, into equity becoming majority owners with an 87 per cent stake.

Codeshare agreements

The airline, partly owned by Dutch carrier KLM, said it has filed an application to the Competition Authority of Kenya (CAK) to add Air France to its existing codeshare agreement with KLM.

Mr Mikosz said the current joint venture was very profitable, noting that he would be the first to challenge were it not making money.

"I am a bit annoyed that the existing KQ-KLM joint venture is questioned so much", he said.

New York flights

"Kenya Airways is on a continuous improvement trajectory on its way towards returning to profitability," said Mr Mikosz.

Further the CEO said they were paying special attention to their strategic plan to launch a flight to New York next year.

"This will be our longest flight when launched. This route will cost and bring us millions of dollars. As much as we are determined to launch the route in the next 12 months, we are also doing it cautiously," he said.

 

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