Kenya Airways issues profit warning
Wednesday December 18 2019
National carrier Kenya Airways (KQ) has announced that it anticipates 25 per cent or more lower earnings for the period ending December 31, 2019 when compared to 2018, pointing to wider losses this year despite several cost cutting measures by the carrier.
In a notice signed by Kenya Airways Board Chair Michael Joseph, the troubled airline blamed the performance on stiff competition.
“Although Kenya Airways realized improved revenue growth in the year, profitability was constrained by the increased competition in the airline area of operations, which, in turn, has increased pressure on pricing in order to remain competitive,” he said.
“In addition, the adoption of new International Financial Reporting Standards (IFRS) 16 rules in 2019, has required significant adjustments to both the profit and loss statements and balance sheets for the current financial year,” he added.
The profit warning means that KQ will report a net loss greater than the Ksh7.5 billion ($75 million) that was recorded in December 2018 when higher costs offset a jump in revenue.
The troubled airline has been making efforts to improve earnings after several years of posting losses.
Fuel, personnel and cost of aircraft have been identified among the top three drivers of KQ’s expenses, contributing to about two-thirds of the operating costs.
Earlier this year, the board had announced that KQ - which is 48.9 per cent government-owned and 7.8 per cent by Air France-KLM - plans to double its fleet over the next five years if they can find the right financial structure.
Following the resignation announcement by outgoing CEO Sebastian Mikosz earlier this year, the airline on Monday appointed Jambojet chief executive Allan Kilavuka to fill the seat in an acting capacity.
Mr Kilavuka's appointment is effective January 1, 2020.
Mr Mikosz, to the shock of many, opted out of the top job before the expiry of his contract that was to end in June next year citing personal reasons.
The Polish national used strategies such as fleet expansion, addition of new routes and collaboration with African airlines in hopes of turning around KQ's performance.