Tougher days may be ahead for Kenya Airways (KQ) as the state carrier posted a record loss of Sh25.74 billion Kenyan shillings ($252.5 million) for the year to March from just Sh3.38 billion a year earlier owing to losses from hedging after oil prices fell.
The airline, part-owned by AirFrance-KLM, has faced rising debts due to new aircraft purchases at a time its major source of passengers, Kenya’s tourism industry is facing hard times following a string of attacks by Islamist militants. The company also blamed external factors like the Ebola crisis that hit West Africa and the effect of travel advisories.
“We have had turbulent times and this loss is obviously significant. It is, however, important to know that we have made significant investments at a time when the industry generally was going through had times,” said Chief Executive Officer Mbuvi Ngunze.
Finance Director Alex Mbugua also said: “We had growth of the fleet which was not matched by revenue growth.” As part of its fleet renewal programme, the airline had bought five B787 Dreamliners, two B777-300 and three B737-800NG. During the same period, the carrier exited the entire fleet of 767’s from operations. But with competition from carriers from the Middle East, it became harder for the company to recoup its investments.
KQ has been finding it difficult to pay salaries and meet the day-to-day costs of running its operations as revenues continue to dip. To help the company stay afloat, the Kenyan government, in May, gave the airline a Sh4.2 billion loan. The state carrier has appointed the African Export-Import Bank (Afreximbank) as financial advisor for a capital raising plan and to arrange a bridge loan of $200 million, according to Ngunze.