Kenya Airways flies into stormy skies as costs rise

“There will be an improvement in the bottom line though not high in the second half,” he said.

In the first six months, the airline saw its overheads increase to over one billion shillings due to the payment of Sh618 million to union workers following a two- and- a -half day strike.

The airline and union agreed on a 20 per cent salary increment to be paid out in two years.

The balance was additional costs in support of the realised growth in capacity, recruitment and training costs to support growth.

KQ increased its capacity, contrary to industry trends; most airlines have reduced capacity due to the slow demand.

The global industry’s capacity, measured as Available Seat Kilometres (ASK), is down 3.6 per cent while KQ’s stands at 6.7 per cent.

The airline says this was to support its African network where it launched six new routes during the period, mainly in central and southern Africa.

But traffic remained low on some of the routes, meaning that the airline was not able to cover all its costs of flying its equipment.

The airline’s actual passenger traffic, which is measured in Revenue Passenger Kilometres (RPKs) dropped by 4.7 per cent.

This led to the Cabin Factor, which shows use of available seats drop to 66 per cent from 73 per cent from the previous period.

The airline also saw both passenger and cargo yields drop due to competition in the market , leading to lower prices which subsequently eroded its yields.

The national carrier earned less in US cent, the industry measure, but more in shillings mainly due to the weaker currency.

Despite the reduced revenues and operating profits, the airline posted a 17 per cent increase in pre-tax profits to Sh1.2 billion for the period ending September, 2009.

This was from gains of acquiring un-hedged fuel at market prices, which were lower compared to the prior period, leading to a direct saving of Sh5.7 billion.

As some hedges expired, the airline was able to get new ones at a cheaper price.