The Kenya Airways (KQ) turnaround strategy is on the right track as revenues improved by 5.4 percent over the 2015/16 financial year. The total revenue stood at KSh. 116 billion. The revenues have grown since the 2013 debut loss before tax of KSh. 10.8 billion. The growth of revenue in 2016 is attributed to a 5 percent growth in passenger related revenues.
Kenya Airways made a loss before tax of KSh. 26.1 billion, a 12 percent improvement from the previous year. The loss was mainly attributed to the foreign exchange loss of KSh. 9 billion as the shilling fell in value against the dollar. This affected the dollar-denominated loans in expensive interest expenses. The falling fuel prices also had an unfavourable impact on KQ’s fuel hedges leading to a KSh. 1.5 billion realised fuel hedges losses.
Path to recovery
The Group Chairman, Ambassador Dennis Awori, said that the company is on its path to recovery. “Important to note is the fact that excluding one-off impacts related to asset sales, compensation for late delivery of new aircraft, write-offs, impairments and provisions, the Group broke-even at operating loss level”, said Ambassador Awori.
The company made a tremendous effort to reduce the operating costs which fell by 5 percent, driving the operating loss to drop by 75 percent. However, the sharp rise in finance and other costs dampened the gains made in reducing the operating loss driving the loss before tax to drop by only 12 percent. The finance costs now stand at KSh. 7 billion, a 48.9 percent increase while other costs rose more than 8 times over the period.
“Going forward, the main focus of the company will be to build on the gains made in the airline’s turnaround strategy whose main planks are closing the profitability gap, refocusing the business model, as well as creating a sustainable financial structure”, said Ambassador Awori in the report.
The shareholder equity was, however, eroded during the period as the company remained in the red. At the moment, for every shilling invested in the company, the shareholders are losing KSh. 24. Further, each share held by investors now makes a loss of KSh. 18. The auditors, KPMG, gave the company an unqualified opinion on the books despite the total liabilities exceeding the total assets by KSh. 35.7 billion.