Kenya Airways blames ebola, insecurity for loss of Sh10bn

Kenya Airways Thursday reported a Sh10 billion loss for the half year through September despite recording increased revenue.

The management blamed insecurity in the country and the outbreak of Ebola in West Africa for the results, the biggest to be announced in Kenya.

Analysts said they expected the airline to report a loss, but not in the magnitude it did. “We were suspecting that they were on a rough patch, but the reported loss was way bigger than we had anticipated. Generally, the airline business is volatile, but we didn’t expect this,” Mr Eric Musau of Standard Investment Bank said on Thursday.

BREAKING BAD NEWS
Total revenue for the period increased by 4.5 per cent to Sh56 billion, but it was outweighed by high running costs. The airline ran below capacity leading to an operating loss of Sh5 billion.

In his first investor briefing, new managing director Mbuvi Ngunze had a hard time breaking the bad news.

“Of course it is not a good feeling,” Mr Ngunze told the Nation in an interview.

The chief executive took office at the beginning of this month, succeeding Mr Titus Naikuni, who retired after heading the company for 11 years.

Mr Ngunze said the performance was aggravated by an impairment loss of Sh5.4 billion on depreciation of aircraft approved by the board for sale.

Mr Musau said this raises concerns among investors about whether the company could have other assets that are similarly over-valued.

The news saw the company’s share price at the Nairobi Securities Exchange drop by 15.34 per cent to hit a 12-month low of Sh7.60.

The company said regional insecurity had resulted in fewer passengers after a number of Western countries issued travel advisories against Kenya.

The airline also suspended indefinitely flights to Sierra Leone and Liberia due to the Ebola outbreak, resulting in capacity reduction of over 20 per cent.

While the company has put in place recovery measures, Mr Ngunze said, earnings for the full year are still expected to be below last year’s by more than a quarter.

“Second half-year results are unlikely to reverse the full impact of the first-half loss and attain results close to or at last year’s levels,” he said.

Mr Ngunze hopes that the country’s security situation will continue to improve to boost tourist numbers.

The chief executive also hopes to win the hearts of Kenyan travellers who, he said, do not support the airline though it is the national carrier.