Kenya Airways’ (KQ) net loss has more than doubled to hit a record Sh38.26 billion in the financial year ended December due to a rise in financing costs after the government took over servicing one of the dollar-denominated loans.
The net loss grew 1.4 times from Sh15.87 billion posted in 2021 and takes the national carrier’s accumulated loss to Sh172.68 billion.
The board, however, says the airline is on course to hit break-even point this year and profitability by 2024 —something it has not done since 2012 when it closed with net earnings at Sh1.66 billion.
“We are emerging. I am very excited with what we are doing. We have a journey to walk to 2024, but green shoots of change have started to show,” said Allan Kilavuka, the chief executive.
KQ had seen a rise in total income from Sh70.22 billion to Sh116.87 billion but suffered a net loss increase majorly due to a Sh18 billion finance cost that was passed through the income statement after the State took over the servicing of one of the dollar-denominated loans.
Costs grew from Sh86.4 billion to Sh155 billion, mainly driven by fuel prices, which increased by 160 percent or Sh26.91 billion. Other direct operating costs increased by Sh12.4 billion due to increased capacity.
“Net financing cost increased by Sh23 billion because of a one-off transaction that was taken during the year pertaining to the takeover of a US dollar-denominated loan by Kenyan government which converted the loan to Kenyan shillings,” said Hellen Mathuka, chief financial officer at KQ.
“The conversation required as a company to recycle the foreign exchange losses through the profit and loss accounting, having an impact of Sh18 billion.”
The State last year took over the $525 million debt it had guaranteed KQ after the airline defaulted on payment.
Also read: State faces 12bn KQ debt pressure
KQ saw its total revenue increase by 66 percent to Sh117 billion as passenger numbers rose by 68 percent to 3.7 million and cargo business uplift increased by 3.5 percent to 65,955 tonnes.
However, the airline saw a 59 percent rise in total operating costs for the year to Sh122.4 billion, with direct operating costs increasing by 94 percent on increased operations and huge global fuel price increases throughout the year.
Fuel costs rose by 160 percent on increased prices and more consumption due to a rise in flight operations to take up 53 percent of the direct operating costs.
Mr Kilavuka said the airline recorded an improvement if you strip off the Sh18 billion that was passed through the income statement.
“The Sh18 billon is not a financial loss, but a reclassification, and that has a big impact on the results,” he said.
Chairman Michael Joseph said the board and management remain focused on implementing several key strategic initiatives to help the company become profitable by 2024.
“This 2023 looks good, and we hope to continue this way. We really expect that by the end of this 2023, we will be in a break-even from a financial point of view and profit level in 2024,” said Mr Joseph.