Upwards trend for Kenya Airways as financial results are announced

KENYA AIRWAYS REDUCES ANNUAL LOSSES BY MORE THAN HALF

(Posted 26th June 2014)

Risen revenues, up by over 7 percent and last financial year reaching 106 billion Kenya Shillings plus cost savings through various measures of over 1.5 billion Kenya Shillings have helped Kenya Airways to reduce their losses compared to the 2012/13 year by over 50 percent to 4.86 billion Kenya Shillings before taxes.

While more savings are expected during the 2014/15 financial year, mainly due to the reduced fuel consumption of the new B787-8 Dreamliners which will replace the aged, fuel guzzling B767-300ER’s, there is still the open question on tax liabilities for the new aircraft and the spare part package needed to maintain these new aircraft. VAT charges for the 10 new aircrafts due for delivery this financial year, 6 B787, 2 B777-300ER’s and 2 B737-800NG’s are expected to be in the range of 14 billion Kenya Shillings and while the airline, supported by AFRAA, continues to lobby the Kenyan government to rescind this tax decision, there is not guarantee that this will in fact happen.

This puts KQ at a distinct disadvantage versus other leading African airlines like Ethiopian, South African and Egypt Air, none of which are saddled with such tax burdens. In addition, will the continued roll out into Africa of Turkish Airlines, Emirates, Qatar Airways and Etihad, none of which has to cope with similar taxation, pose a competitive threat for Kenya Airways vis a vis market share from across the continent feeding into their network, via Nairobi, to the Gulf and the Far East.

Recent decisions by the Kenyan government to impose transit Visa on South African citizens is also thought to have an effect on one of KQ’s main African markets as travelers have the option to use Ethiopian or any of the Gulf carriers to reach their final destination without the added cost of paying 70 US Dollar for a Visa, leave alone the time wasted to procure the same through the Kenyan High Commission in Pretoria which requires a personal appearance by the applicant and then takes 5 days to process – a short sighted tit for tat response by Kenya for similar measures taken by South Africa but at a time when Kenya needs more South African visitors and travelers a lot more than the other way round.

Meanwhile will during the current financial year the impact of Jambojet, Kenya Airways’ LCC subsidiary, become more apparent, which was launched on 01st of April to protect and increase domestic market share but also in preparation for the arrival of a more serious LCC competitor. Fastjet PLC today announced their parting ways with Fly540 Kenya and their intent to set up their Fastjet brand in Kenya to operate on domestic and regional routes, subject to receiving regulatory approvals.

More details on the financial results are expected to be posted on the airline’s website www.kenya-airways.com