How Kenya Airways passengers lost Sh4.3 billion on ticket expiry breach

Kenya Airways CEO Allan Kilavuka.

Photo credit: File | Nation Media Group

Kenya Airways customers lost Sh4.26 billion last year on failing to use their tickets within the allowed window.

The airline discloses in the latest annual report covering the financial year ended December 2023 that it booked the amount as revenue in its books of accounts, marking a 54.3 percent rise from the Sh2.76 billion it received from expired tickets in the previous financial year.

The airline sells tickets in advance and books the value, net of discounts and taxes, as current liabilities in the ‘sales in advance of carriage’ account. This figure is reduced either when KQ or a partnering airline completes the transportation or when the passenger requests a refund.

KQ, as the carrier is known by its international code, says it usually gives passengers up to 13 months to use their tickets, beyond which it marks them as expired and books them as revenue.

“Unutilised tickets are recognised as revenue on expiry following the lapse of the estimated period where the company believes there will be no material claim from passengers. The current estimated period is 13 months,” said KQ in the annual report.

The airline says it opened the year with Sh18.95 billion in prepaid tickets, against Sh10.89 billion in the previous year. Ticket sales during the year rose 65 percent to Sh157.3 billion. Customers used Sh143.8 billion of the tickets, leaving the airline with Sh28.2 billion as prepaid tickets.

The rise in the expired tickets recognised as revenue came when the national carrier witnessed a 43 percent increase in the number of customers who booked to travel globally. KQ says the passenger numbers for last year were only two percent below the pre-Covid level. It allows customers who run into challenges to either reschedule flights or seek refunds for tickets that are processed within a minimum of 30 to 40 days.

However, the refund policy comes with strict terms and conditions. For instance, KQ says it offers full refunds on deceased passengers but there is no refund for family members who were accompanying the now departed or were with the passenger when he or she died. It only waives the date change fee for such family members.

Customers who lose tickets and seek refunds have to furnish the airline with “satisfactory” proof of the loss, and pay a “reasonable administration charge.”

“You have one year from the ticket's original issue date to reschedule your travel without losing the full value of the ticket (less any applicable change fees),” states the airline.

KQ equally holds itself responsible if it cancels or reschedules a flight that fails to stop at a passenger’s destination or causes them to miss a connecting flight. In this case, it will carry them at a different convenient date at no extra charge or refunds the amount.

The national carrier managed to cut its net loss by 40.6 percent to Sh22.6 billion in the financial year ended December 20223 as revenue grew 52.8 percent to Sh178.4 billion. Part of the reason it posted a loss was a Sh24 billion foreign exchange loss as the shilling shed a quarter of its value against the dollar.

The airline posted an operating profit of Sh10.5 billion, the first in seven years which the management, led by CEO Allan Kilavuka, hopes to build on this financial year.

KQ has put up a spirited fight to win back customers and return to profit territory. One of its biggest headaches was travel cancellations and delays that were hurting its reputation. But the airline has in recent months upped its game, in what saw it ranked as the most punctual African carrier by aviation analytics firm Cirium, having made timely arrivals in more than 70 percent of its flights. This saw it beat Ethiopian Airlines which has been leading for years.

The airline has also been increasing its capacity in line with the resumption of global travel and has been recalling hundreds of its employees to service new destinations and resume flights that had been abandoned.

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