Kenya Airways on route to recovery as operational losses reduce by three quarters


(Posted 21st July 2016)

Kenya Airways’ this morning announced the financial results of the 2015/16 financial year, which ended on the 31st of March.
As anticipated were the operational losses of last year reduced by some 75 percent, showing that the measures taken to control cost and improve operational performance did yield the results top executives suggested throughout the past 12 months, often in the face of acid but misplaced criticism, mainly expressed on social media by pseudo experts now proven wrong.
Some of the major improvement area can be singled out like:

o Passenger numbers increased to 4.23 million, despite a reduction in Available Seat Kilometres (ASK)
o Cabin factor up five per cent
o Revenue grows by five per cent to Kshs 116 billion
o Operating costs reduced by five per cent
· Gross profit significantly improved, while reducing overall losses
o Gross profit up 42 per cent
o Operating margin improved by 11 percentage points
o Reduction in operating loss from Kshs 16.3 billion in FY14/15 to Kshs 4.1 billion in FY15/16
o Loss before tax reduced by 12 per cent

Mbuvi Ngunze, Kenya Airways CEO and Group Managing Director, earlier today said:‘The results were achieved in a tough aviation context, in which airlines continue to be weighed down by wild currency fluctuations, volatility in fuel prices, and a changing commodity price environment. An industry forecast by IATA indicates that African airlines will continue to be in negative profit territory in 2016, despite overall improvement in performance. In conjunction with the overall trajectory of the results, a number of other key performance indicators for Kenya Airways also showed marked improvements’.

As part of the airline’s turnaround strategy Operation Pride ­– whose main components are closing the profitability gap, refocusing the business model as well as optimising the capital of the company – KQ has rationalised its fleet through selling off and leasing some of its surplus aircraft, and monetised certain assets. A staff right-sizing exercise is ongoing. The plan aims at both revenue and cost-side improvements. These actions have already reduced fleet costs by about $7 million from July 2016, thus improving the airline’s liquidity and no doubt impacting positively on the results of the current financial year.

Mr Ngunze then added: ‘One of the key goals of Operation Pride is a reduction of the gap in profitability, which is on track. We have also revised our network to improve connectivity and ability to sell flights to more destinations within the network, while densifying our Africa presence through increased frequencies. We are turning the corner and are in a better place, strategically. Most significantly, and in a difficult global business environment, we are improving our business and keeping a tight lid on our costs. I thank all our employees, shareholders, partners and associates whose cooperation and input made these improved results possible’.

Notably have the two main shareholders of the airline, the Government of Kenya and KLM endorsed the direction taken by the new management team and stood by the airline, nixing critics and making the improvements in financial results possible.