KQ Records 75% Reduction In Operating Loss

IMAGE COURTESY: airwaysnews.com

Kenya Airways Limited (KQ) has reaffirmed its progress towards recovery after it recorded a 75 per  cent reduction in operating loss from Kshs 16.3 billion in 2015 to Kshs 4.1 billion as per the group  financial statements for the year to 31 March 2016.

The operating loss improvement of Kshs 12.2 billion was underpinned by a growth in cabin factor to  68.3 per cent, with an increase in passenger numbers from 4.18 million to 4.23 million, a reduction  in direct operating costs, overheads and fuel, and an increase in fleet costs.

Despite this improvement, the group incurred a loss before tax of Kshs 26.1 billion compared to  Kshs 29.7 billion in the prior year, an improvement by Kshs 3.6 billion, and 12 percent.  Three significant items negatively impacted the financials.

The US dollar strengthened significantly  against the Kenya shilling (12.9%) and other currencies resulting in an increase in foreign exchange  loss of Kshs 9.7 billion.

The movement in international oil prices during the year unfavourably impacted the Group’s fuel  hedges resulting into an additional Kshs 5,093 million in realised fuel hedges losses.  However, the company registered an improvement in the mark to market valuation of fuel hedges of  Kshs 2,614 million in the year.

As part of the airline’s turnaround strategy Operation Pride whose main planks are closing the  profitability gap, refocusing the business model as well as optimising the capital of the company –  KQ has rationalised its fleet through selling off and leasing some of its surplus aircraft, and  monetised certain assets. A staff right-sizing exercise is ongoing.

The plan aims at both revenue and cost-side improvements. These actions have already reduced  fleet costs by about $7 million from July 2016, thus improving the airline’s liquidity.  After extensive internal review of alternatives, KQ has reviewed the options in relation to its capital  structure in order to ensure the financial flexibility, stability, and sustainability that is commensurate  with the turnaround strategy.

“The Government of Kenya and KLM, in their capacity as major investors in Kenya Airways, have  indicated their continued strong support of the company’s operational turnaround and the capital  structure optimisation process; are closely involved throughout the process and intend to remain  major stakeholders in the company over the long term,” said Mr Ngunze.

 

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