Tourism slump deepens Kenya Airways pretax losses

Kenya Airways said on Thursday its pretax loss for the year to March widened to 29.71 billion shillings ($293 million) from 4.86 billion shillings after a slump in Kenyan tourism and losses from hedging after oil prices fell.

The airline, part-owned by AirFrance-KLM, also told an investor briefing it had chosen Cairo-based African Export-Import Bank (Afreximbank) to advise it on capital raising and to arrange a $200 million bridging loan.

The carrier, one of Africa’s largest, has faced rising debts due to new plane purchases while Kenya’s tourism industry, a key source of passengers, has slumped following a spate of Islamist militant attacks.

“We had growth of the fleet which was not matched by revenue growth,” Finance Director Alex Mbugua said, referring to the purchase of Boeing 787 Dreamliner planes, which started in 2013.

Alongside a slowdown in tourism, Mbugua said the airline was hurt by competition from Gulf carriers.

Fleet ownership costs doubled to 25.93 billion shillings, mainly due to an impairment of 5.58 billion shillings from the sale of Boeing 777-200 aircraft, replaced by the Dreamliners.

The firm booked an unrealised loss of 5.78 billion shillings from its fuel hedging after the slide in the price of crude.

Kenya Airways uses hedging as a risk management tool, entering agreements with counterparties, who pay them when the price of oil rises beyond a certain point, and vice versa.

Frequent attacks by Islamists from neighbouring Somalia have hit Kenya Airways hard, with tourists shunning the country’s palm-fringed beaches and safaris. (REUTERS)