Corporate News
Analysts have predicted a return to profitability for the national
carrier Kenya Airways ahead of the announcement of end of year results.
FILE
Nation Media Grou
By VICTOR JUMA
In Summary
- KQ to spend up to Sh87 billion ($1 billion) on acquisition of new aircraft in the current financial year, a significant outlay that analysts said would impact on its turn-around plan.
- The capital expenditure will be financed by new debt from the African Export Import Bank.
Kenya Airways
(KQ) cut its net loss by 57 per cent last year, helped by increased
sales and cheaper fuel, even as a heavy capital expenditure budget
pointed to a sharp rise in the national carrier’s financing costs.
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The national carrier Wednesday announced that its net loss
for the year ended March 2014 had dropped to Sh3.3 billion from Sh7.8
billion reported in 2013.
It announced that it would spend up to Sh87 billion
($1 billion) on acquisition of new aircraft in the current financial
year, a significant outlay that analysts said would impact on its
turn-around plan.
“Finance costs are likely to go up over the coming
year with the additional debt being taken up to finance the fleet
expansion,” said Standard Investment Bank in a research note.
Kenya Airway’s interest costs stood at Sh2.4
billion in the year ended March, during which it racked up Sh89 billion
in short and long-term debt.
Its operating costs stood at Sh108.7 billion. The
carrier can however take courage from growth in revenue, which rose 7.2
per cent in the year to Sh106 billion.
It is hoping that the new long-range aircraft,
majority of which include the fuel-saving Dreamliner, will help to grow
sales and cut operating costs.
The capital expenditure will be financed by new debt from the African Export Import Bank.
The company is betting on fleet expansion to grow
its capacity and route network, with an eye on increased demand for air
travel.
The airline said its performance this year is
dependent on economic growth in its key markets of Africa and Asia as
well as travel advisories from the European source market.
The performance saw the airline’s share price close
at Sh10 at the Nairobi bourse yesterday, having dropped eight per cent
from Sh11.5 on Tuesday.
The carrier had posted a net profit of Sh384
million in the first half ended September 2013, compared to a Sh4.7
billion net loss a year earlier, indicating a weaker performance in the
second half.
It said it recorded lower passenger numbers from
last year’s fourth quarter, attributing it to a mix of travel advisories
and security risks that has hurt Kenya’s image as a travel destination.
“During the second half, the company made a loss largely driven by reduced passenger revenues,” the firm said in a statement
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