KENYA AIRWAYS’ HALF YEAR RESULTS – NOT GOOD BUT THERE IS HOPE
(Posted 13th November 2014)
The ‘Investor Briefing’ by Kenya Airways earlier this morning at the InterContinental Hotel in Nairobi was the first true public test for the company’s new CEO Mbuvi Ngunze, since he took over from Dr. Titus Naikuni at the end of last month. While he might have fancied an easier entry into the public domain and to meet key shareholders and the assembled media pack, he according to reports from the room conducted himself as well as could be expected, considering the stark financial news he had to deliver. ‘I am taking over at a time of turbulence’ was Mbuvi Ngunze quoted to have said at the start of his presentation, but being in the airline business he will no doubt also know that all it takes at times is to slightly change course or ascend to a higher flight level to get out of the turbulences and fly once again in clear air.
That said of course, with the cabin loadfactor down from a year ago, when it stood at 70.1 percent to just 64 percent at the end of H1, this figure alone speaks volumes and is a significant reason in the downturn of the company’s financial fortunes, with more losses on the cards instead, as was hoped earlier in the year, a break even or even a slight profit at the end of the financial year which ends on 31st of March next year. The route from London to Mombasa is currently down by 40 percent compared to a year ago, and last year was already one of challenges compared to the record breaking year for Kenya’s tourism industry in 2011/12. This translated to a deep red bottom line, again, as at the end of H1 the slight operational profit the airline showed a year ago with some 380+ million reversed into a 12.5 billion Kenya Shillings pre-tax loss, no doubt having shareholders cringe in their seats over the prospect of yet another year sine dividends.
Lease obligations and borrowings in contrast rose from just over 50 billion Kenya Shillings a year ago to over 95 billion Kenya Shillings, nearly doubling compared to a year ago, adding to the challenges the new CEO is now facing up to.
On the upside will lower aviation fuel prices and the 20 percent reduction in fuel burn by the new B787 Dreamliner fleet help to bring some positive trend towards the bottom line in the second half of the year while other investments are bound to pay off in the medium term when Kenya has been able to resolve some of the country’s fundamental challenges which are beyond the ability of the national airline to resolve. A brand new home terminal, brand new lounges, new aircraft, a range of new catering choices on board, new busses for ground transport to and from apron parking positions – plans are underway to provide premium passengers in such cases with their own vehicle – will all increase brand loyalty and in time to come show results. More aircraft will join the fleet next year, three more Dreamliners, four more B737-8HX’s and perhaps some more as you will no doubt find out when watching this space in coming months.
The new man at the helm of Kenya Airways, Mbuvi Ngunze, will have his work cut out for him no doubt but having come from the operations arena where he served as COO for several years, he will be acutely aware of where improvements are needed to deliver a first class product, comprising of new infrastructure, new facilities, new aircraft and new lounges and now only needing that new spirit to take roots that Kenya Airways actually can, using that familiar election slogan of Obama’s first campaign ‘Yes We Can’.
The Pride Centre, Kenya Airways’ own inhouse training facility, will probably see a sharp rise in courses, workshops and seminars dedicated to a more proactive and more engaging customer service to be sure not only keep their faithful on board their own planes but add passenger numbers across the network.
Added information can be sourced via www.kenya-airways.com/uploadedFiles/2014-15_Half_Year_Investors_Presentation%20.pdf
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