Kenya Airways PLC (KQ) has reported a 120% improvement in its operating profit for the first half of 2023, from a loss of Kshs 5 billion in 2022 to a profit of Kshs 998 million.
The Group’s revenue increased by 56% to Kshs 75 billion, driven by a 43% rise in passenger numbers to 2.3 million and a higher cabin factor of 76.1%.
However, the airline’s operating costs also increased by 39% to Ksh 74.1 billion.
The airline’s performance was further affected by foreign exchange losses of Ksh 17 billion due to the devaluation of the Kenya shilling and the legacy debt of $1 billion.
As a result, the airline recorded a loss before tax of Kshs 22 billion. Kenya Airways chief executive officer Allan Kilavuka said that the legacy debt and the currency devaluation are the main challenges facing the airline.
“The reason why this has a significant impact on our results is because we have a lot of legacy debt, about $1 billion of debt, and when you reconvert it using the new exchange rates, it hits your profit and loss account,” said Allan Kilavuka, Kenya Airways chief executive officer.
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“We are working to resolve the issue of the legacy debt in collaboration with our stakeholders and the Kenyan government. The debt is worsened by the 14% devaluation of the Kenyan shilling against the dollar since January, which we have had to book as foreign exchange losses.”
“The devaluation of the Kenya shilling has a significant negative impact on our financials as a majority of our transactions are carried out in the major foreign currencies. This has, in turn, an impact on our overhead costs, which have increased by 22%,” said Mr Kilavuka.
Michael Joseph, the Chairman of Kenya Airways, said that the company focused on three things during the period: improving the customer experience, achieving operational excellence, and saving cash.
He said that the airline also raised revenue by offering passenger charters and increasing scheduled operations.
“These figures underscore the airline’s performance during the period and offer encouraging indications of ongoing recovery and turnaround initiatives that have been put in place by management to return the airline to profitability are bearing fruit,” said Michael Joseph.
“Our focus looking ahead is on recapitalising the business to place Kenya Airways on a stronger footing and provide a stable base for long-term growth,” said Kilavuka.
“We will continue focusing on our network expansion and fleet optimisation to increase passenger and cargo capacities,” he said,
Kenya Airways shares remain suspended
Kenya Airways shares remain suspended from trading on the Nairobi Securities Exchange in March 2020, pending the completion of a restructuring plan.
KQ shares were initially suspended from trading on the NSE in July 2020 after Parliament began to review the National Management Aviation Bill 2020, which would lead to the establishment of Kenya Aviation Corporation. This holding company will house Kenya Airways, the National Aviation Council, and the Kenya Airports Authority.
The suspension was extended for nine more months in April 2021. Then, starting in January 2022, for a year.
The Kenyan government owns a 48.9 per cent stake in KQ, while Air France-KLM owns 7.8 per cent.