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Monday, December 11, 2023

Kenya Airways ‘on the path to profitability’ despite weak shilling, debts


In August, KQ reported a growth in its operating profit, the first in about six years, with the airline management linking the Sh998 million growth to KQ’s turnaround strategy.

The national carrier Kenya Airways has expressed optimism at returning back to profitability at the end of the current financial year in the wake of growing pressure and criticism over its poor performance in the recent past.

Kenya Airways chief executive officer Allan Kilavuka during a meeting with a departmental committee of the National Assembly, said that the airline had instituted a raft of measures to cut down on costs while also increasing revenues in the current and the next financial year.

The CEO also argued that the airline has been undertaking a number of structural reforms to align it with the changing aviation business and put it at par with its competitors across the region and globally.

Kenya Airways, in August this year reported a growth in its operating profit, the first in about six years, with the airline management linking the Sh998 million growth to KQ’s turnaround strategy.

During the same period, however, KQ’s operating costs also increased by about 40%, with its pretax loss rising to Sh21.7 billion in the first half of the year, from Sh9.9 billion a year earlier. Earnings before interest, tax and depreciation (EBITDAR) grew by 7% points.

At the meeting with MPs, Kilavuka said that he was confident that the airline would experience a turnaround and return to profitability despite some of the liquidity challenges that it has been experiencing. 

The National Assembly departmental committee on transport and infrastructure had summoned the KQ CEO to find answers on four issues including the airline’s projected financial health for the next three years, its current debt status in light of the government’s guarantees and financial support, the impact of the depreciating Kenya shilling against the US dollar and strategies put in place to enhance the airlines operational viability.

Kilavuka in his submissions, expressed optimism about the company’s future, guaranteeing members of profitability based on financial projections.

“We are confident that Kenya Airways will return to net profitability in the financial year 2024,” said Kilavuka.

However, the CEO cautioned that the airline still faced daunting challenges, including high debts and capacity dumping from larger airlines which resulted in unfair competition.

Kenya Airways, one of Africa’s three biggest, has been insolvent since 2018 after an expansion drive left it with hundreds of millions of dollars of debt it could not service.

In March 2020, the airline’s shares were suspended from trading on the Nairobi Securities Exchange pending the completion of a restructuring plan.

At the Parliamentary meeting, committee members sought assurances from the CEO regarding continued performance improvement and questioned why the company had experienced significant losses in previous financial years.

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