Kenya Airways posts expanded Ksh.13 billion annual loss

National carrier Kenya Airways (KQ) has reported an expanded Ksh.13 billion loss for the year ending December 2019 representing a 71 percent rise in losses from 2018.

The greater loss in the period is largely attributable to increased operating costs which cancelled out growth in revenues earned.

The group saw a 12.4 percent increase in operating costs driven by the increase in capacity deployed and a rise in fleet ownership costs attributed to the return of two aircrafts sublease Oman Air.

The rise in costs cancelled a 12.4 percent growth in revenues to Ksh.128.3 billion from improved passenger, cargo and other revenue streams.

“Based on the above revenue and cost dynamics, the group reported an operating loss margin of 0.7 percent,” the airline noted in a commentary of its financial results issued Tuesday.

Higher operating costs year over year have continued to haunt the national carrier’s bottom line as it sinks deeper into loss making territory.

In December 2019, the airline issued a profit warning indicating its annual loss would expand by atleast 25 percent to Ksh.9.5 billion from 2018.

The expanded loss breaks Kenya Airways curve of loss reduction in recent years which saw loss making come down to Ksh.7.6 billion in 2018 from Ksh.26.2 billion in 2015

The 2018 annual loss was for instance lower than a Ksh.9.4 normalized 2017 loss.

New accounting standards have further raised cost for the carrier to further eat through higher grossed revenues.

For instance, KQ adopted IFRS 16 rules on January 1 last year which now obligate it to list operating leases as balance sheet items from a prior off-balance sheet regime.

The airline now finds itself trending rough waters as it seeks to stay afloat through the crisis occasioned by the Covid-19 pandemic.

As a result of the current health emergency, Kenya Airways suspended most of its operations on 25th March as with all domestic and international passenger flights suspended.

Presently, KQ has pegged its survival on cutting staff benefit costs and leveraging its cargo business which has so far earned the firm in excess of Ksh.214 million ($2 million) in revenues.

“We estimate that it will take atleast a year to gain confidence of the travellers and start recovering the travel demand,” said KQ Chairman Michael Joseph.

“We however must look at the bright side of the crisis and the opportunity it presents us to recalibrate and reset our business in order to adopt measures that will full proof our airline.”

The clouds gather on the carrier even as Treasury remains mute on its Ksh.7 billion bailout application to ride through the Covid-19 storm.

KQ is destined for nationalization following the approval to return its management to government by the National Assembly in 2019.