Companies

KQ recovery delays on flat passenger growth

alex mbugua

Kenya Airways Chief Financial Officer Alex Mbugua said the airline expected to close the year with a modest profit. Photo/DIANA NGILA

Kenya Airways passenger numbers remained flat in the quarter to March on lower traffic in Europe and sluggish performance of Africa routes in what could delay the recovery of the national carrier.

Kenya Airways Tuesday said passenger numbers remained flat at 828, 032 in the three months compared to a growth of 5.2 per cent in a similar quarter in 2011.

The national carrier also reported slower growth in the quarter to December and a Sh4.8 billion net loss for the six months to September 30 and had warned investors that its earnings for the year to March would be at least 25 per cent lower than last year’s.

“It looks likely KQ will remain in losses since they needed a big second half recovery to offset the Sh4.8 billion loss,” Mr Erick Musau, an analyst at Standard Investment Bank, said earlier.

“Everything remains on the cost side given their fairly flat numbers and it’s worrying that KQ is not completely done with employee issues.”

(Read: KQ shocks market with Sh4.8bn half-year loss)

KQ finance director Alex Mwangi said the airline expected to close the year with a modest profit that’s less than 25 per cent of the Sh1.7 billion net profit posted the prior year.

The carrier has been keen to cut costs, especially from its ballooning wage bill, given the uncertainty over the global aviation market especially in Europe where KQ draws a quarter of its sales.

According to the International Air Transport Association (IATA), the industry lobby group, traffic growth for Europe has remained flat since the beginning of 2012 in line with the economic pessimism in the continent.

This is part of the reasons the carrier shed 578 jobs in September to reduce its wage bill that had doubled from Sh6 billion in 2007 to Sh13.4 billion last year.

KQ’s share price has failed to benefit from the recovery of the Nairobi bourse to shed 12 per cent in the past six months to Sh10.95.

Passenger numbers to Amsterdam, London, and Paris fell 26.2 per cent in the three months to March to 83,506. Traffic on the route was down 19.1 per cent in the quarter to December, blamed on the soft economy in Europe.

“Europe recorded the highest reduction due to the economic challenges facing the Euro-Zone economies that necessitated cutbacks in capacity offered including the closure of the Rome route,” KQ said in a statement.

However, traffic to the Middle East and Asia jumped 11 per cent to 130, 522 travellers as new destinations such as New Delhi begun to boost traffic.

On African routes, which account for half of KQ revenues, 424,490 passengers were carried during the quarter period, representing a growth of 1.1 per cent. The airline has hinged its growth strategy on connecting Africa’s cities to Asia and Europe.

Domestic travel was up 4.3 per cent while cargo capacity carried in the three months dropped 14.9 per cent on lower demand in Asia and Europe.

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