National carrier Kenya Airways (KQ) has reduced its net loss for the year ending March by Ksh16 billion to Ksh10.2 billion.
This was achieved an improvement in operating profit to Ksh900 million for the year 2016/17 compared to an operating loss of Ksh4.1 billion in the prior period, a 122 % swing.
The improvement in operating performance was underpinned by growth in cabin factor of 4% during the year, with an increase in passenger numbers and lower operating costs in line with the recovery strategy ‘Operation Pride’.
The Group’s loss after tax dropped sharply to KShs 10.2 billion compared to a loss of KShs 26.2 billion reported prior year.
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The Group’s turnover reduced by 8.5 %due to reduction in capacity (ASKs) by 4 percent, and the mix effect of a 5.4 % increase in passenger numbers, which was however diluted by the combination of the drop in Yield per Revenue Passenger Kilometre (Yield/RPK), the negative exchange rate impact and market pressure from increased capacity by competitors.
In addition, cargo volumes declined due to phasing out of Boeing 777 and entry of Boeing 787. This led to reduction in capacity offered into the market resulting in constraining the space available to uplift cargo within the network.
This resulted in a 15 % dip in loads uplifted to 57 Kilo Tonnes. The average rate per kilogramme uplifted also reduced by 5.3 % in line with market pressures.
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The rationalisation of operations resulted in a reduction of total direct operating costs by Ksh2.5 billion to Ksh65.3 billion. Fleet ownership costs at Ksh15.5 billion decreased by Ksh14 billion compared to prior year. Overheads, however, went up by 7.4% compared to prior year, mainly due to the one-off impact of restructuring costs
“We are seeing the first results of our investment in the turnaround,” said Kenya Airways CEO Mbuvi Ngunze, who hands over the reins end of this month. “I had always said this was a marathon. There is a fundamental shift in our business. Kenya Airways remains resilient despite the operating market challenges managing to achieve improved results.”
Financial Highlights
- Turnover lower by 8.5 percent, mix impact of higher passenger numbers, capacity reduction on cargo and lower yield
- Direct operating costs lower
- Fleet costs lower by 47.5 %with fleet rationalisation
- Overheads up due to one-off impact of restructuring costs
- Gross profit up 35.7 per cent
- Operating profit of KShs 0.9 billion, a 122 %swing from an operating loss of KShs 4.1 billion; and
- Loss after tax reduced by 61 % to KShs 10.2 billion, from KShs 26.2 billion.
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The airline’s turnaround strategy, ‘Operation Pride’ continues to focus on three main priorities – returning to profitability through revenue enhancement and cost containment, refocusing and resizing the business and model, and enhancing partnerships, as well as restructuring the capital of the company.
“We have already fully implemented 342 initiatives that are delivering value. The changes made have so far resulted for example in more competitive pricing, better rates from critical suppliers, improved connectivity at the hub leading to an increase of 13% in intra Africa traffic year on year amongst numerous other gains,” he added.
The airline, in July last year announced a capital optimization plan to reduce the overall debt of the business and improve liquidity to place Kenya Airways on a stronger long-term financial and operational footing for growth.
Rosy outlook
The optimisation process will have no impact on the airline’s passengers and other customers, who will continue to receive the same high quality of service. The new winter schedule, which comes into effect on October 30th, will see the airline continue investing in Africa by introducing 30 additional flight frequencies to existing destinations.
On June 1st Mr Sebastian Mikosz will take over as the CEO and Managing Director of Kenya Airways.
[crp]
