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Kenya Airways issues profit warning amid increased competition

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A Kenya Airways plane. FILE PHOTO | NMG

Kenya Airways (KQ) #ticker:KQ Wednesday issued a profit warning for the year ending December, signalling its loses will widen beyond the Sh7.56 billion the national carrier posted last year.

This will sink it to a loss of at least Sh9.43 billion but it could be higher given that half year loss for the period ending June more than doubled to Sh8.56 billion, complicating the recovery prospects.

The airline last reported a profit in 2012 when it closed with net earnings of Sh1.66 billion. Its worst performance was in 2016 when it booked a Sh26.2 billion loss. In 2017, it was a Sh10.2 billion loss.

The national carrier, which has been in losses since 2013, blamed the expected poor performance on increased competition in the airline’s areas of operations, which, in turn, has increased pressure on pricing in order to remain competitive.

The board of directors made the announcement Wednesday in a notification to the Capital Markets Authority as is required of all Nairobi Securities Exchange-listed firms whenever they anticipate earnings to dip by at least a quarter.

“Although Kenya Airways realised improved revenue growth in the year, profitability was constrained by the increased competition in the airline area of operations, which, in turn, has increased pressure on pricing in order to remain competitive,” said Mr Joseph in a notice.

“In addition, the adoption of new International Financial Reporting Standards (IFRS) 16 rules in 2019, has required significant adjustments to both the profit and loss statements and balance sheets for the current financial year,” he added.

A mix of strategic blunders and intensified competition has however complicated its recovery efforts even as it changed management.

The firm is also issuing a profit warning barely a few days after the board of the company appointed Jambojet boss Allan Kilavuka as the firm’s interim chief executive officer, replacing Sebastian Mikosz who is set to leave the company in the next few days.