KQ posts historic Sh36.2b loss on pandemic shocks
Wednesday, March 24th, 2021 00:00 | 2 mins read
Kenya Airway’s flight into turbulence continued yesterday as the national carrier reported a whopping Sh36.2 billion loss after tax in the financial year ended December 31, 2020 on Covid-19 shocks.
The pandemic disruptions forced the airline into what is one of the biggest dip in corporate Kenya’s history, as loss making nearly tripled from the Sh12.98 billion loss of the previous year.
The amount the airliner lost dwarfs the total funds used to construct the Thika Highway which cost taxpayers Sh32 billion.
Managing Director Allan Kilavuka attributed the huge drop to the Covid-19 pandemic containment measures that saw an international lockdown which also affected domestic air travel.
“An increase in the losses was expected, due to reduced airline passenger traffic brought about by the effects of the prevailing pandemic,” he said while announcing the results in Nairobi yesterday.
During the period under review, revenues dropped by 58.8 per cent to Sh52.8 billion from Sh128.3 billion in 2019, on the back of a shrinking cabin factor that saw passengers of KQ, as the carrier is known internationally, reduce by 3.4 million, from Sh5.2 million in 2019 to Sh1.8 million in 2020.
This impacted negatively on passenger revenues which dipped by Sh69.9 billion between April and August 2020 which forced the airliner to convert the planes into cargo carriers.
Operating costs reduced by 38.5 per cent to Sh79.9 billion, from Sh141.3 billion in 2019 with savings amounting to Sh22.6 billion achieved from fuel, an additional Sh27.4 billion in navigation and landing related costs as well as Sh3.4 billion in employee cost savings and company restructuring.
During the same period in 2019, KQ made 181.9 per cent loss before tax equivalent to Sh36.6 billion, with cash generated from operating activities also reducing by 59.4 per cent year on year to Sh6.5 billion.
Kenya Airways chairman Michael Joseph warned shareholders that a gradual return to full recovery will be slow, while predicting that the airline will achieve a full re-bound in 2024.
“It is unfortunate that we do not see a recovery to pre-pandemic levels this year or in the next,” he said.
The airline is now banking on its cargo business, which is currently being revamped through repurposing of its B787dreamliners, to service among others the Southern African region from the Oliver Tambo International Airport cargo hub.
Further, the management is hopeful the airline will leverage benefits of nationalisation, which Joseph reckoned “will give us (KQ) strength and ability to compete on an equal playing field with peers, especially Middle Eastern Carriers.”
With Parliament seeking to pass the National Aviation Management Bill 2020 that will make the airline one of three subsidiaries in a soon to be formed aviation holding company, KQ hopes the cost of doing business will go down, and hence its profitability.
The Bill intends to make KQ one of three subsidiaries in an aviation holding company called Kenya Aviation Corporation.
The others will be Kenya Airports Authority, which will operate all the country’s airports including Jomo Kenyatta International Airport (JKIA) in Nairobi, under the ambit of the Kenya Aviation Investment Corporation.
While the corporation will hold shares in the operating entities, KQ will be exempt from taxes on engines, maintenance and fuel, to make its tickets affordable.
The government had targeted to complete the process end of October last year but a section of MPs blocked the legislation in September owing to lack of public participation.