Kenya Airways cuts losses to Sh7.5b but future still on edge

Kenya Airways Chairman Michael Joseph (L) and CEO Sebastian Mikosz when they appeared before the National Assembly Transport Committee over the JKIA sale at County Hall, Nairobi. [Boniface Okendo/Standard]

Kenya Airways (KQ) has reported a Sh7.5 billion loss for the full year to December 2018 even as its board mulls making a proposal to the Government to nationalise the airline as an alternative to the controversial Jomo Kenyatta International Airport (JKIA) takeover plan that has been met with resistance.

The national flag carrier reported a Sh6.3 billion loss in the nine months to December 2017. 

KQ last year changed its financial reporting period from April 1 to March 31 which now covers January 1 to December 31 in line with the rest of the industry.

It is still in transition and the 2018 financial statements cover a 12-month period from 1 January 2018 to 31 December while the financial statements for 2017 cover a nine-month period from 1 April to 31 December 2017.  

Comparing last year’s loss to like-for-like with 2017, the airline said it had cut losses by 20 per cent from the previous year when it reported Sh9.4 billion loss.

“The 2018 results are not directly comparable with the 2017 results as it is a representation of 12 months against the nine months in 2017. Were the 2017 results to be annualised there would be have been improvement in the results for the year,” said KQ Chairman Michael Joseph when the airline released its results yesterday.

Revenues grew to Sh114 billion in the year to December 2018 from Sh106 billion in 2017.

Among the factors that resulted in the airline continuing to report heavy losses included fluctuation in prices of fuel, which hit a three-year high of $86 (Sh8,600) per barrel in September 2018.

Towards end of 2018, the airline started hedging against risk associated with volatile oil prices and expects the impact of the policy to be seen in the current financial year.

“Fuel price volatility remains a major challenge for airlines around the world, and Kenya Airways is no exception. As a result, we saw our fuel costs rise by 73.6 per cent from Sh19 billion incurred in the 9-month period in 2017 to Sh33 billion in the full year ended in December 2018,” said Chief Executive Sebastian Mikosz.

“The total cost of fuel in the 12-month period of 2017 was Sh25.5 billion, a 30 per cent increase.”

The airline, which has for the better part of this decade reported losses, had pegged its turnaround on operating the JKIA hub. This has however faced resistance from across Kenya.

Mr Joseph said the airline had other options to oversee its recovery that included Government buying out other investors, which would eventually see ownership revert to the state and the airline delisted from the stock market.

He also said the airline could scout for a strategic investor, a route taken in 1996 that resulted in KLM being in control. 

Joseph, however, declined to go into the details of these options, noting that the airline is awaiting a decision on the Privately Initiated Investment Proposal (PIIP) on JKIA that is still under consideration by the Public Private Partnership Unit at Treasury.

KQ is also waiting feedback from Parliament that has had public hearings on the matter.

“The process has not yet been completed. The Parliamentary Committee on Transport has done a series of hearing and will come back with their recommendations and based on those recommendations, we will see what direction we’ll go…. do we continue with the PIIP or do we take another direction?” said Joseph.

“If for some reason the Committee on Transport comes back and says we should stay as we are, then we will have to find another way in which to grow, maybe a little slower but we will have to grow as an airline.”