Kenya Airways half-year profits rise

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By Jackson Okoth

National carrier Kenya Airways has recorded a pre-tax profit of Sh1.2 billion, up from Sh1.1 billion, a 17 per cent rise for the half year ended September 30, its group financial director has said.

The airline attributes the improved performance to a decrease in jet fuel prices.

However, the performance excludes huge hedging costs that brought down the airline’s performance last year.

It posted a loss after tax of Sh5.6 billion for the period ended March 31.

The half-year results released on Friday, exclude forward fuel hedging costs, which has denied the airline the benefit of a fall in the price of crude on the international market.

Excluding hedging costs, Kenya Airways realised a Sh5.7 billion reduction in fuel cost.

This significant reduction was primarily driven by lower jet fuel prices that could have realised a total reduction on costs by Sh9.1 billion or 63.6 per cent. Fuel costs represented 24.2 per cent of operating costs.

In the face of difficult business climate last year, Kenya Airways registered a loss after tax of Sh5.66 billion. Had the provision of fuel hedging costs not been taken into account, the results would have reflected a profit after tax of Sh1.3 billion. The airline was conditioned to factor hedging costs as per the new international accounting standards.

Under the current review period, the airline could have realised a Sh5.7 billion reduction in fuel costs due to a fall in the price of jet fuel.

crude oil prices

While the airline has hedged its crude oil purchases at $100 a barrel, prices are presently knocking on the door of $80 a barrel. At the start of the year, oil prices were below $40 per barrel.

The global economic meltdown that began last year affected the airline’s performance over the half year. These results were also impacted by a strike called by the airline’s unionisable staff.

The airline’s overheads increased by Sh1.1 billion, largely driven by a staff pay award of Sh618 million.

The airline posted an operating profit of Sh162 million, down from Sh176 million the previous year. The net profit after tax was Sh860 million compared to Sh736 million the previous period.