Kenya Airways (KQ) has reported its tenth consecutive loss after it completed a decade in the red territory with a record Sh38.26 billion full-year loss, hurt by debt and skyrocketing fuel prices.
The national carrier on Monday highlighted the scale of the turnaround task ahead when it broke its own record for the country's biggest loss from a listed company.
The airline more than doubled its loss from Sh15.87 billion to Sh38.26 billion for the financial year ended December 2022.
The airline has been in the hands of four different CEOs in the last 10 years as the strategy shifted from expanding fleet size to narrowing it down as the accumulated losses hit Sh172.68 billion amid State bailouts.
Now the current CEO Allan Kilavuka says he sees the national carrier, which fell into insolvency in 2018 after an expansion drive left it with billions in debt, hitting break-even at the end of December and a profit by the end of next year.
“We are emerging. I am very excited about what we are doing. We have a journey to walk to 2024 but green shoots of change have started to show,” said Mr Kilavuka.
The fete, if achieved, will introduce something that has not been synonymous with the airline’s books of accounts since 2012 when it closed with net earnings of Sh1.66 billion.
KQ chairperson Michael Joseph, who had a stellar career at Safaricom as the CEO and chairman of the telco that grew into the most profitable firm in Kenya, now finds himself in a company with the highest-ever loss in corporate Kenya.
The airline is drawing encouragement from an improvement in its underlying performance and other metrics such as a rise in customer numbers from 68 percent to 3.7 million and a 66 percent rise in turnover from Sh70.22 billion to Sh116.78 billion.
Mr Joseph, like Mr Kilavuka, is hoping for a miracle profit next year and insists the record loss contains packets of progress, especially that included a one-off cost of Sh18 billion.
“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 hit profit level in 2024,” said Mr Joseph.
Mr Kilavuka said the airline would have delivered Sh12.74 billion operating profit and Sh2.68 billion net profit in the year under review in the absence of the one-off cost and the more than doubling of fuel costs.
But the airline still has piling debts, unpredictable fuel prices and demanding pilots to deal with as well as the Sh108 billion negative equity that makes the airline technically insolvent.
The airline has liabilities worth Sh117 billion falling due in under a year and a further Sh159.7 billion in long-term liabilities. It is however banking on more government support.
“The element that is still outstanding is the restructuring of the balance sheet which needs support from the Kenya government,” said Mr Kilavuka.
KQ suffered a rise in net loss majorly due to the Sh18 billion finance cost that was passed through the income statement after the government took over the servicing of $525 million (Sh69 billion) dollar-denominated debt after the airline defaulted on payment.
Costs grew from Sh86.4 billion to Sh155 billion mainly driven by fuel, which increased by 160 percent or Sh26.91 billion.
Other direct operating costs rose by Sh12.4 billion due to increased capacity.
Fuel costs took up 53 percent of the direct operating costs in the year the airline did not have any hedge against sharp rises in the prices of the commodity.
“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 the 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.”
Mr Kilavuka said the airline recorded an improvement if you strip off the Sh18 billion that was passed through the income statement.
“The Sh18 billion is not a financial loss but a reclassification and that has a big impact on the results,” said Mr Kilavuka.