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Passenger numbers, cargo boost KQ earnings

Passenger numbers, cargo boost KQ earnings

Kenya Airways (KQ) revenues were boosted by increased passenger numbers and cargo, contributing sh95.1 billon and sh8.5 billion respectively.

These two continue to grow for the second year running, providing impetus of hope that the airline could rebound soon.

Passenger numbers were 4.84 million at close of December 2018, while the 9-month period ended 31st December 2017 recorded 3.43 million passengers. The airline achieved a cabin factor of 77.6 per cent (12-month period) over the reporting period, while the 9-month period ended 31 December 2017 recorded 76.2 per cent.

Announcing its financial year results for 2018 earnings, the company recorded a total revenue of sh114.18 billion.

However, oil prices continued to expose the airline to losses, inhibiting its revival from billions of losses. But the company said that they are implementing a new fuel hedge policy they hope to reduce their exposure.

The company CEO Sebastian Mikosz admitted that had the oil prices remained constant, within the 2017 range, they would have recorded a significant savings in fuel cost within the year. This would have been a the much-needed positive recording in our bottom line. “Oil prices increased significantly in 2018 to a three-year average peak of US$86/bbl (Brent Crude) in October before falling back down to a low US$51/bbl in late December 2018.”

The airline earned sh10 billion from other lines of business including; Ground handling services, Maintenance Repairs and Overhaul (MRO) and Training, amongst others.

Fuel, personnel and the cost of aircraft remain the top 3 drivers of airline costs contributing to about two thirds of total cost. Of these costs fuel remains the most volatile and most airlines continue to hedge fuel prices to protect themselves from the volatility.

Commenting on the New York route, the CEO said “New York is symbolic. This route is challenging, but it allows us to position KQ and Kenya differently. We are flying 5 weekly frequencies, we adjusted this to cater to the seasonality of the route. From Jun to Aug, we will fly daily.”

The airline carried 15,000 passengers with a load factor of 64.6 per cent to and from NYC in Nov to Dec 2018.

In 2018, the cumulative direct operating costs (DOCs) stood at sh75 billion, with fuel cost taking about 44 per cent of the total cost of operation.

The cost of fleet ownership was recorded at sh18.9 billion and overheads including wages stood at sh20.9 billion. Operating profit margin has changed from 1.2 per cent in the 9-month period ended 31 December 2017 to -0.6 per cent in the year ended 31st December 2018.

Kenya Airways recorded an operating loss of sh683 million and a loss before tax position of sh7.59 billion for the year ended 31 December 2018.

Its Chairman Michael Joseph affirmed that they will continue to implement the prudent financial management and the turnaround initiatives started in 2018. “Continuous improvement of operations, efficient network growth and improvement of service quality and delivery are necessary to enable the airline to hold its own in a highly competitive environment”, he said.


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