Kenya Airways has cut its losses by a fifth for the six months to September helped by cost cutting measures the airline employed over the half year period.
The national carrier yesterday said its loss after tax reduced by 20.5 per cent to Sh3.8 billion from Sh4.8 billion reported over a similar half in 2016. The improved position was despite a marginal drop in revenues that stood at Sh53.1 billion by end of September 2017, going down 0.4 per cent from Sh53.8 billion in 2016.
KQ said overheads declined 8.9 per cent while fleet costs dropped 21.9 per cent, offsetting the marginal decline in revenues to help the airline reduce its losses.
Kenya Airways Chief Executive Officer Sebastian Mikosz said the prolonged electioneering period had affected KQ’s performance, noting that travellers have been jittery and avoided coming to Kenya. Rising cost of fuel also affected the airline’s performance during the half year period.
“The presidential election has had a huge impact on the company especially the intra-African market,” Mikosz said at an investors’ briefing yesterday.
This was his first half year briefing to investors. He joined KQ in June and the cost-cutting that has reduced the airline’s losses could be attributed to him. He has been described as a ruthless cost-cutter in his previous assignments and during yesterday’s briefing, he told investors he would continue with cost reduction strategy and also do away with routes that do not add value to the airline.
“In order to drive better performance, the airline will focus on continuous cost-reduction, introduction of new revenue streams and network optimisation,” he said. “We will review routes and keep only the profitable routes… if necessary cut or shrink some routes.”
Yesterday, the airline appointed three new directors to the board. Treasury has picked Investment Secretary Esther Koimett while the 10 lenders have seconded former KCB Chief Executive Martin Oduor-Otieno and Carol Musyoka to the board.
The appointments to the carrier’s board come after the conclusion of a financial restructuring that resulted in the Government increasing its shareholding while a number of local banks that were owed by the airline have come on board as shareholders. The Government will now get three slots while the banks will get two seats on the board.
The restructuring – referred to as capital optimisation plan – which entailed the conversion of debt owed to Government and some 10 local banks to equity has substantially changed the airline’s shareholding structure.
Good future ahead
The Government increased its stake to 48.9 per cent while a consortium of local banks through a special purpose vehicle – KQ Lenders Company Ltd – owns 38.1 per cent of the airline. The restructuring has also seen the dilution of Dutch carrier KLM’s stake from 26 per cent to 7.8 per cent.
KQ Chairman Michael Joseph said the airline would now leverage on the new capital structure to turn around KQ, which placed on a stronger financial footing and a stable base for long term growth.
“It is a long road (turning around the airline) and might take up to 12 months or more time. We are asking for patience and support to be able to turn around the airline,” he said.
“We have the best possible management team and I think we have a good future ahead… I can see light at the end of the tunnel and we will report good full year results.”