KQ cuts losses by half

Kenya Airways’ loss-making run narrowed by more than half as stabilisation of the Eurozone economies and favourable jet fuel prices boosted recovery.

In the 12 months to March 2014, the national carrier reported Sh3.4 billion loss from Sh7.9 billion loss suffered over a similar period in 2013. The management attributed this to a stable business environment in Kenya.

“Direct operating costs reduced due to lower fuel prices and management’s focus on procurement savings in maintenance contracts,” the airline’s outgoing chief executive Titus Naikuni said.

PASSENGER NUMBERS

The loss largely resulted from reduced passenger numbers following a series of security threats that have kept away travellers to the country especially after the United States, UK and Australia governments issued travel advisories to their citizens.

“We had the JKIA fire which affected us; We had the Westgate (terrorism) issue whose impact took longer than expected,” Mr Naikuni, who steps down in November after an 11-year stint at the national carrier, said.

On Tuesday, the Kenya Airways board appointed Mr Mbuvi Ngunze, the current chief operating officer to succeed Mr Naikuni from December 1.

Persistent insecurity and terrorism threats in Kenya, rising competition from Middle East carriers and fuel costs continue to affect operations of the airline, projections of profitability in the near future notwithstanding. 

“It has been a tough year for all of us, but our expectation is that we are going into profitability in future,” the airline’s finance director, Mr Alex Mbugua, said.

KQ’s revenue rose to Sh106 billion — a 7 per cent increase from Sh98.8 billion in the period under review. The carrier reported reduced fuel expenses due to lower prices and increased efficiency courtesy of newer aircraft.

Capacity to Europe rose by 5.9 per cent due to increased operations of the Boeing 777-200 into Amsterdam in place of the smaller B767-300. 

Delivery of the B777-300 with a capacity of 400 passengers also spurred growth into the Middle and Far East destinations by 7 per cent following introduction of daily flights to Guangzhou.

“The airline’s strategy to continue providing seamless connections between intra-Africa points to destinations in China and India is still on course and will be enhanced with the arrival of the Dreamliners,” Mr Naikuni said.

CUT PROFITABILITY

Earlier this month, the International Air Transport Association (IATA), which represents about 240 airlines, cut the profitability forecast of the industry in 2014 due to the declining economic performance of the Chinese economy.

The 2014 performance is, however, expected to be stronger than 2013 as airlines continue to grapple with double taxation issues, high regulatory costs and inadequacies in air traffic administration.