Turnaround progress

TurnaroundWith the release of its 2015-2016 financial results, KQ reaffirmed its progress towards recovery after it recorded a 75% reduction in operating loss, from Ksh 16.3 billion in 2015 to Ksh 4.1 billion in 2016.

The improvement of Ksh 12.2 billion was underpinned by a growth in cabin factor to 68.3%, an increase in passenger numbers from 4.18 million to 4.23 million, and a reduction in operating costs, overheads and fuel, while fleet costs increased. Despite this improvement, the group incurred a loss before tax of Ksh 26.1 billion, compared to Ksh 29.7 billion in the prior year, an improvement of 12%.

Three significant items negatively impacted the financials. The US dollar strengthened significantly against the Kenya shilling (12.9%) and other currencies, resulting in an increase in foreign exchange loss of Ksh 9.7 billion. The group’s cost of borrowing increased, incurring an additional Ksh 2.3 billion in interest expense. In addition, the movement in international oil prices during the year unfavourably impacted the group’s fuel hedges, resulting in an additional Ksh 5,093 million in realised fuel hedges losses.

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, an improvement of Ksh 11,139 million while loss before tax improved by Ksh 2,513 million.

Mbuvi Ngunze, Kenya Airways CEO said: “The results were achieved in a tough aviation context, in which airlines continue to be weighed down by wild currency fluctuations, volatility in fuel prices, and a changing commodity price environment. An industry forecast by IATA indicates that African airlines will continue to be in negative profit territory in 2016, despite overall improvement in performance.”

As part of its turnaround strategy, Operation Pride, KQ has sold off and leased some of its surplus aircraft, and monetised certain assets. A staff right-sizing exercise is ongoing. The plan aims at both revenue and cost improvements. As a result, fleet costs have already reduced by about US$7 million from July 2016.

Mr Ngunze commented: “We are turning the corner and are in a better place, strategically. I thank all our employees, shareholders, partners and associates whose cooperation and input made these improved results possible.

Connectivity agreement to boost efficiency
SITA, the global air transport information and communications technology (ICT) solutions provider, is to provide Kenya Airways with the latest communication solutions to facilitate the airline’s connectivity, smoothen its operations and ensure rapid exchange of information.

Kenya Airways is seeking to provide the best passenger experience by improving efficiencies in the management of its route network. Using SITA Connect, the airline will have access to high-speed, secure connectivity that links employees and sales offices around the world to its central systems, helping to manage everything from reservations, check-ins and boarding.

“As we seek to position Kenya Airways for the future, we needed a single communications partner that could take care of all our connectivity requirements, no matter where we operate,” said Mbuvi Ngunze, Group Managing Director and CEO of Kenya Airways. “SITA, with its truly global footprint and experience, provided us with a world-class solution supported by a local presence in each destination, connecting even the furthest outstation to our hub in Nairobi.”

SITA’s AirportHub™ – a shared connectivity platform already used in more than 300 airports in over 100 countries – enables airlines to connect securely to their central systems and applications from any airport within the AirportHub network.

“Connectivity-on-demand is the lifeblood of any airline, ensuring the smooth and rapid exchange of information needed to support effective operations no matter where an airline operates, the size of their operation or their business model,” Hani El-Assaad, SITA President, Middle East, India and Africa said.