KENYA AIRWAYS PROFIT WARNING EXPECTED TO SHAKE MARKETS THIS WEEK
The Pride of Africa has over the weekend issued a profit warning that full year results will likely see a reduction of profits by as much as 25 percent compared to the last financial year, inspite of only days ago issuing vastly improved passenger numbers and demand rises. When the Nairobi Stock Exchanged opens this Monday morning a share price reduction is the likely result when sell offs begin to take hold, down from the 20.25 Kenya Shillings per share of last Fridays close. The causes of the profit warning were given as the problems in the key European markets as a result of the Eurozone crisis and rising fuel cost, likely to affect the bottom line, although analysts are also pointing to rising wage bills as the airline seeks to recruit more pilots to fly the additional aircraft on order, giving the unions representing pilots a near unprecedented leverage in negotiations with the company for improved pay and greater benefits.
Kenya Airways is set to go for a major share issue this year aimed to raise the capital required to finance the ongoing expansion drive, which in coming years will see the fleet double and the number of destinations and frequencies to existing destinations substantially increase. There is also speculation over the delivery dates of the first of the 9 ordered B787 Dreamliners as a result of additional delivery problems at Boeing, and the option of retrofitting the ageing B767 fleet with integrated winglets, a choice made by rivals Ethiopian Airlines. Should further delivery delays be announced, this would be one option to reduce the fuel burn of the B767 fleet and keep rising cost in check, and Boeing could be a major contributor to the expense in a compensation deal covering added time needed to have the first Dreamliner fly in Kenya Airways livery. Watch this space.