Tuesday November 6 2012

Kenya Airways reports Sh4.7bn loss due to huge costs

By Paul Wafula

Kenya Airways on Tuesday reported Sh4.7 billion net loss in the first half of the year ending Sept 30, 2012.

KQ which recently resorted to cost cutting measures by sacking employees attributed the loss to reduced number of passengers and high fuel prices. Read (Kenya Airways sends 453 home, completes Sh800m lay-off plan).

In 2011, the airline reported Sh2 billion net profit.

The airline's turnover dropped 9.3 per cent to Sh49.8 billion in the six months to September 2012, down from Sh54.932 billion mainly driven by a decline in passenger revenues.

“We were unable to predict what was happening in the market place correctly, and this is one of the reasons we had to pull out of daily London flights. We also suspended operations to Rome, Muscat and Zanzibar in order to reduce the loss making routes,” Kenya Airways Chief Executive Titus Naikuni said in a press conference after releasing the results.

Mr Naikuni said KQ incurred Sh826 million staff retrenchment costs. The costs have also hit the airline’s first half’s performance but expects a Sh1.2 billion in saving going forward annually.

Its total costs rose to Sh55.3 billion compared from Sh53.9 billion previously. Passenger revenues declined from Sh48.6 billion in 2011 to Sh43.6 billion.

“The Kenyan market was negatively impacted by travel advisories which contributed to reduced passenger numbers to Kenya,” the airline said in a commentary accompanying the results.

This negative performance pushed the airline to issue a profit warning for the full year results on grounds that it will not be able to match last year’s performance.

“Though the second half is expected to be much better, we believe that it will not be able to lift us past the Sh6 billion comprehensive loss we have made in the first half. So based on capital markets guidelines, we issue a profit warning because we believe our full year results will be lower by more than 25 per cent compared to last year,” the airline’s chief finance officer Alex Mbugua said.