Kenya Airways’ full year results expected on Friday


(Posted 13th June 2013)

Friday this week will be D-Day for Kenya Airways as the company prepares to release the annual results for the financial year 2012/13, which closed on 31st March.

Considering that the half year results were written already in red ink, the airline did in November last year confirm half year losses amounting to 4.8 billion Kenya Shillings, the final results for the year are unlikely to show a profit, one reason the company share price at the Nairobi Stock Exchange dropped in recent days into the low 10+ Kenya Shilling range. Financial analysts in Nairobi in turn said the airline’s stock is substantially undervalued, presenting an opportunity to snap up bargains in anticipation of better trading results in coming years.

The announcement of results comes on the back of expectations that the airline is set to announce additional orders for B737NG aircraft while one source close to them has speculated that KQ might be in talks with Boeing over an accelerated delivery of their ordered B787’s, to be able to phase out the, in comparison at least, fuel guzzling aged B767 fleet. The first Dreamliner is due to arrive in Nairobi in March next year, at least going by the present delivery schedule Boeing has given, but as neighbouring rival Ethiopian is shortly receiving their fifth B787 already, the pressure will be on to match a similar fleet renewal in Nairobi too.

Aviation pundits agree that one of the keys, besides the rapid introduction of fuel saving new aircraft, will be the reduction of the national airline’s cost structure, an effort seriously impaired last year when the Industrial Court halted a voluntary retrenchment exercise. Wild cat strikes by the main labour union did also not help to accomplish a range of cost saving measures the airline’s management had proposed, a situation not lost on shareholders who saw the value of their holdings trimmed back by nearly a quarter over the past 12 months.

A recent code share deal and cooperation pact with Etihad, Abu Dhabi’s national airline, which is known to seek out investment opportunities in carriers thought to complement and enhance Etihad’s market position, has also given rise to talk about a possible investment by that airline, should the opportunity arise to acquire an entry stake in Kenya Airways. ‘As long as the foreign shareholding is not reaching the critical 50 percent margin, it would be a good thing under present circumstances. KLM, Kenya Airways’ second largest shareholder after the Kenya Government, is also in talks with Etihad. Anyone seeking to acquire a significant stake in Kenya Airways, and I think significant would be anything from say 5 percent upwards, would surely offer a premium over the current share price which stood at 10.55 at close on Wednesday, so such a transaction could be profitable for a seller’ said a regular aviation source from Nairobi.

While the market in Kenya showed some trepidations ahead of the FY 2012/13 result announcement, there is also significant potential in buying into KQ now at relatively low share prices, a gamble which might well pay off handsomely in time to come as key market places for Kenya Airways in Europe are coming out of their economic downturn, offering the prospects of more passengers and higher yields. Expect details on the financial performance of Kenya Airways right here, just as soon as the results have been formally announced by the airline’s CEO and Board. Watch this space for breaking and regular news from East Africa’s vibrant aviation scene.

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