Kenya Airways announces FY 2019 results, bailout request denied by Treasury

Kenya Airways (IATA:KQ), Kenya's flag carrier and one of Africa's larger airlines, has today announced its results for the financial year ended 31 December 2019. It has posted a total increase in revenue from 2018 by 12.9% to Kshs. 128,317 million (approx US$1.19 billion) and an Operating Loss Margin of 0.7% at Kshs. 12,985 million (approx. US$120 million).

A Kenya Airways Boeing 787-8 at John F. Kennedy International Airport, New York. Photo by Andrew Pries | AeroNewsX

The growth in revenue has partly been attributed to the expansion of the airline's network, with routes such as Geneva, Rome, and Malindi inaugurated in 2019, leading to an 8.9% growth in passenger revenue. Cargo tonnage also increased from 64,238 tonnes to 68,264 tonnes.

However, with the expanded route network also came a 12.4% increase in operating costs, which in turn also grew due to increased fleet ownership costs arising from the return of two Boeing 787 aircraft that had been subleased to Oman Air. The rise in operating costs was partly offset by low fuel costs through the airline's fuel hedging program.

Where the loss made by the airline was concerned, some of the contributing factors were the increased operating costs, and adoption of International Financial Reporting Standards (IFRS) 16 which had a significant impact on the airline's lease accounting model in 2019.

Elsewhere, the carrier has been denied much-needed financial support by the Kenyan government. This comes just two weeks after reports that the carrier had made an application for emergency state aid amounting to Kshs. 7 billion (approx. US$65 million).

According to Treasury Cabinet Secretary Ukur Yatani, the lack of funding commitment stems from the fact that KQ's issues are deeper than those brought about by the COVID-19 pandemic and subsequent grounding of aircraft, which has led to an estimated loss of US$78 million in passenger revenue between January and April 2020. The Kenyan government has envisioned a long-term strategy for the ailing carrier, with plans to nationalise it in the near future. The Treasury had also earlier indicated that no allocation had been made for the carrier in the soon to be announced FY 2020/2021 national budget.

At the moment, KQ is reliant on revenues from cargo operations, mainly aboard its 787-8 aircraft. Notable routes include those from Nairobi to London and Nairobi to Johannesburg, carrying among other things, fresh horticultural produce and medical equipment. The carrier also continues to operate charter flights from Mumbai, London and Guangzhou in an effort to take Kenyans back home.

According to the airline's Chief Executive Officer Alan Kilavuka, he expects that air travel will not be cheap once passenger operations resume, and that the airline is at risk of losing 51-76% of its market up until December 2020.

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