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.