Kenya Airways reports record $248m net loss

Kenya Airways CEO Mbuvi Ngunze (left) and group finance director Alex Mbugua during the release of the firm’s half year financial results for the period ended September 30, 2014. KQ has posted a $247.7 million loss after-tax full year results attributing it to competition from Middle East carriers, hedging losses and high operating costs. PHOTO | FILE  NATION MEDIA GROUP

By Allan Olingo, The EastAfrican

In Summary

• The airline has seen its losses grow by more than 600 per cent last year up from the $28.9 million loss it posted in 2013.
• KQ says it is renegotiating its hedging, ground handling and hotel contracts in a bid to reduce its operating costs.
• The airline's troubled relations with pilots and crew have also significantly contributed to the loss, with Mr Ngunze noting that they have managed to sign an agreement with one of the workers’ union for productivity based increments.Despite this we also benefited from the global slump of fuel that saw our fuel costs drop from $375.8 million in 2013 to $346.9 million in 2013,” Mr Mbugua said.

Kenya’s national carrier Kenya Airways has posted a $247.7 million loss after-tax attributing it to competition from Middle East carriers, hedging losses and high operating costs.

The airline has seen its losses grow by more than 600 per cent last year up from the $28.9 million loss it posted in 2013.

Kenya Airways chief executive officer Mbuvi Ngunze said that they were working towards getting out of the negative book reporting through doing a business diagnostics so that they can seal all loopholes, improve their delivery and increase their cash flows.

“We are currently engaged in a balance sheet restricting. We are pleased to announce that we have signed an agreement with a financial advisor who will help us raise capital and also restructure our debt,” Mr Ngunze said.

The airline said that it was renegotiating its hedging, ground handling and hotel contracts in a bid to reduce its operating costs.

The 2014 results showed that Kenya Airways had a turnover of $1.06 billion for the year, with the direct operating expenses of $732.5 million and fleet ownership costs of $240.9 million.

READ: Kenya Airways flutters in cash crisis

Kenya airways has appointed AfriExim bank as its financial advisors and hopes to get $200 million to finance its business, pay off some of its debts and also organise for the long-term capital injection.

The airline's troubled relations with pilots and crew have also significantly contributed to the loss, with Mr Ngunze noting that they have managed to sign an agreement with one of the workers’ union for productivity based increments.

“It is my hope that the pilots association will come on board and sign this agreement so that we can move forward,” he said.

The results also show that Kenya Airways finance cost have grown two fold from $23.1 million in 2013 to $45.2 million last year. The fleet ownership costs also doubled to 249.9 million in 2014, up from $120.3 million a year earlier.

The airline acquired five Boeing 787 Dreamliner aircrafts, two Boeing 777-300 and three Boeing 737-800 in 2014 as part of its fleet modernisation programme.

Despite the losses, the airline saw its passenger numbers increase from 3.7 million passengers to 4.2 passengers with more than 60 per cent of these being from its Africa routes.

The passenger revenue for 2014 remained flat at $871.2 million from $869.3 million. JamboJet also offered a positive contribution to the rise of passenger numbers within Kenya, having a 29 per cent input on the domestic market growth.

Alex Mbugua, the airlines finance director said that the companies’ overheads for 2014 increased to $236.1 million up from $202.4 million mostly driven by support costs for the expanded network and additional fleet.Despite this we also benefited from the global slump of fuel that saw our fuel costs drop from $375.8 million in 2013 to $346.9 million in 2013,” Mr Mbugua said.