Companies

Kenya Airways reports record Sh25.7bn net loss

KQ

Kenya Airways CEO Mbuvi Ngunze (right) and group finance director Alex Mbugua during the release of the airline's full year financial results in Nairobi on July 30, 2015. PHOTO | DIANA NGILA

Summary

  • The Sh25.7 billion loss after tax was attributable to competition from Middle East carriers and high operating costs.
  • The airline also blamed travel advisories that led to a slump in tourism, as well as runway closures for renovation.

Kenya Airways made the biggest net loss in the country’s corporate history ending down Sh25.7 billion in the year ended March, citing the tourism slump as a key factor.

The loss before tax was at a record Sh29.7 billion, as capital expenditure and operating costs raced ahead of the airline’s revenue growth.

The loss widened the Sh3.3 billion net loss the airline reported a year earlier, reflecting the impact of acquiring new aircraft on debt.

KQ’s revenue increased 3.8 per cent to Sh110.1 billion despite a rise in passenger numbers, with the airline saying it was forced to cut fares in response to competition from Middle East carriers.

Its fleet ownership costs doubled to Sh25.9 billion in the period while overheads rose 17 per cent to Sh24.5 billion.

KQ also provided for a Sh5.7 billion loss from fuel cost hedging, which it says was unrealised in the period but could become due in the near future.

“We have had turbulent times and this loss is obviously significant,” said Mbuvi Ngunze, the airline’s chief executive.

“It is, however, important to know that we have made significant investments at a time when the industry generally was going through hard times.”

Mr Ngunze said KQ is set to draw down Sh20 billion from Cairo-based African Export-Import Bank (Afreximbank) to finance its working capital as it embarks on a long term strategy to return to profitability.

He said the airline is also relying on support from shareholders including the government and Dutch carrier KLM.