Kenya Airways Announces 2018 FY results: What Next?

Photo: AeroNewsX/Guillaume Feyten

Kenya Airways PLC. (KQ) on 30th April 2019 announced its results for the 2018 financial year, beginning January 1 2018 to December 31 2018.

Key highlights of the announcement included a pre-tax loss of Kshs. 7.59 billion (approx.$75.9 million) for the period, up from Kshs. 6.4 billion (approx. $64 million) the previous year. KQ, however, posted a growth in revenue from 80.79 billion in the 2017 financial year to 114.45 billion in 2018.

It is worth noting, however, that the financial results from 2017, and indeed years before that, are not directly comparable to those of 2018. This is due to the fact that in 2017, the company’s financial calendar shifted to a January to December format, as opposed to the earlier March to March format.

The loss is mainly attributed to high fuel costs in 2018, which, at their peak, were close to $100 a barrel. According to Kenya Airways PLC Chairman Michael Joseph, fuel costs account for about 40% of the carrier's costs, and therefore inevitably affect the company's financial health. To mitigate the effects of unstable fuel prices in future, KQ now acquires 65% of its fuel demand under a fuel hedging policy that shields it from exorbitantly high prices.

Additionally, according to Mr. Joseph, the inauguration of the Nairobi (JKIA) - New York (JFK) route in October 2018 was a capital intensive move that is yet to yield the desired results due to the normal gestation period of a new venture. A code-share agreement in the pipeline with American carrier and Skyteam partner Delta, is hoped to improve the outlook of the Nairobi to New York route. This is hoped to offer the carrier’s clients from its extensive route network within Africa with added convenience and flexibility when travelling to the United States, and therefore pump additional revenue into the carrier.

At the moment, KQ is in talks mainly with government stakeholders to go forward with a proposed Public Private Partnership (PPP) transaction dubbed ‘Project Simba’, that would see KQ takeover operations at Kenya’s largest airport, the Jomo Kenyatta International Airport (JKIA). This is an attempt to turnaround the financial fortunes of the cash-strapped national carrier, and receive a badly needed cash injection to expand its fleet and expand its route network.