Kenya Airways eyeing new routes to restore profitability

Monday March 26 2018

Kenya Airways CEO Sebastian Mikosz (left) and board chairman Michael Joseph during release of the financial results on March 21, 2018. PHOTO | SALATON NJAU | NMG

Kenya Airways CEO Sebastian Mikosz (left) and board chairman Michael Joseph during release of the financial results on March 21, 2018. PHOTO | SALATON NJAU | NMG 

By ALLAN OLINGO
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Kenya Airways is on track to solvency and is banking on route expansion, cost optimisation and improvement of service after posting a $60.4 million loss.

During the year the carrier restructured its balance sheet and reduced its annual debt payment obligations, allowing it room to revamp its operations.

In his first year as chief executive, Sebastian Mikosz has seen the airline’s loan repayments drop significantly to $91 million, from $250 million in the year to March 2017.

As at December 2017, the airline’s total debt stood at $1.39 billion, with total assets of $1.4 billion. Its operating profit stood at $13 million, from $8.97 million the previous year.

The results are an improvement from last year, when it posted an after-tax loss of $99.6 million. The airline is now seeking partnerships, new routes and cost optimisation to complete its path to recovery by 2020.

“We will next month seek the board’s approval to add more than 20 new destinations in Africa, Europe and Asia over the next five years. We plan to use the five aircraft Kenya Airways sub-leased to other carriers to build capacity and carry additional passengers,” Mr Mikotz told Bloomberg.

The airline will this year take back two Boeing Dreamliners sub-leased to Oman Air, with one of them expected in the country by September, which it plans to use to ply its New York route starting October and is expected to boost KQ’s revenues by between eight and 10 per cent.

The other Dreamliner and the three Boeing 777-300 aircraft leased to Turkish Airlines will be returned to the airline by end of next year.

“We are looking at at least one European and one Asian route on top of the African network. We might announce two to three new routes to start operating next year,” Mr Mikotz said.

Airline chairman Michael Joseph also said they plan to partner with other airlines.

“We are discussing with South African Airways to join forces on aircraft repairs, route sharing and other issues. For instance, we fly to similar destinations in Africa, so why not share these?” Mr Joseph said.

This year the airline also changed its financial reporting date from March to December in-sync with other aviation players such as travel agents, financiers and lessors.

“Right now, we are restructuring the business, finding ways to increase revenues and keep costs manageable,” Mr Joseph added.

The $60.4 million loss, the airline said was due to the 14 per cent increase in fuel costs mirroring global fuel prices, and a 20 per cent drop in customer numbers.

Last year the carrier airlifted 3.4 million passengers during the nine months to December earning $808 million, but its operating costs consumed $795 million.

This was a drop from 4.2 million carried in the previous year, which the airline blamed on the prolonged electioneering, which saw passengers change their transit points from Nairobi to other African airports.

KQ’s equity stood at $4.17 million in the period under review compared with negative $450 million in the year to March 2017. The change in fortunes stems from a complex restructuring late last year, during which its main creditors, including 10 local commercial banks and the government converted $442 million loans into equity.

This saved it from downfall as part of a $2 billion debt restructuring programme.

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