National carrier Kenya Airways’ big bet on fuel hedging paired up with foreign exchange turbulence to sink it deeper into loss even as green shoots of recovery began to show in revenue growth.
KQ, as the airline is popularly known, reported a Sh26.2 billion net loss for the year ended March compared to Sh25.7 billion the previous year.
The outcome was mainly the result of a Sh5.1 billion loss that the carrier booked from fuel hedging as the global dip in oil prices wiped out the gains made from use of discounted fuel prices in the year under review.
The annual results released Thursday also showed that a weakening of the Kenyan shilling against the US dollar saw the airline book a record Sh9.7 billion in foreign exchange losses, adding impetus to the roll down the loss-making slope.
The national carrier’s record-breaking loss came about despite its booking of significant gains from recent asset sales, including the Sh5.4 billion from the sale of a prime landing slot at London’s Heathrow Airport.
KQ also sold two aircraft as part of its “Operation Pride” restructuring plan, a transaction from which a portion of the expected Sh2 billion gain was booked.
The deals helped shore up the airline’s revenue to Sh116.1 billion from Sh110.1 billion in the same period last year, a pointing to a weakness of growth in revenue from its core business.
“We sold two aircraft in February and we have received that money. The net benefit…is the difference between the loans we took to acquire them and what were paid,” said Mbuvi Ngunze, the chief executive.
The airline, however, reported a growth in passenger numbers of half a million to 4.23 million despite operating fewer aircraft.
KQ’s operating loss position improved to Sh4.1 billion from last year’s Sh16.3 billion while the loss before tax improved by 12.1 per cent to Sh26.1 billion.
KQ’s latest results set a new record in corporate Kenya — deepening as it were the erosion of shareholder equity that began with last year’s massive loss.
The latest loss means the airline’s net worth now stands at a negative Sh35.6 billion down from the previous year’s negative Sh5.9 billion, a development that effectively leaves its owners with no exit path in the near term.
“In the current equity position, getting an investor would be very hard since it would be difficult to value the company,” said Dennis Awori, the KQ chairman.
KQ, which is majority owned by the Kenyan government and Dutch carrier KLM, took a heavy beating from the global dip in fuel prices, booking Sh5.1 billion in fuel hedge losses that significantly impacted its bottom line.
Credit: Business Daily