Kenya Airways, the national carrier, has encountered its largest half-year loss as it grapples with substantial foreign exchange losses and accumulated debt that are disrupting its turnaround strategy.
Despite recording a 56% increase in revenues, amounting to Sh75 billion, a rise of 43% in passenger numbers to 2.3 million, and achieving its first operating profit in six years, the airline’s higher expenses have pushed it further into deficit. The losses have more than doubled to Sh21.7 billion for the first half of 2023.
As seen in a report by the Business Daily, the airline’s losses have surged by 120%, surpassing the Ksh9.9 billion loss reported during the same period in 2022 and exceeding the full-year loss of Ksh15 billion in 2021. These financial setbacks have been attributed to escalated finance costs, soaring to Ksh22.8 billion, marking a substantial 360% surge from the Ksh4.9 billion reported during the first half of 2022.
“For the longest time, we were below the line and now for the first time we are operationally profitable, which shows that the business is actually viable. If we can deal with the legacy issues that have plagued us for many years, we are a viable business, we are an attractive business,” said Kenya Airways CEO Allan Kilavuka.
The increase in finance costs was largely driven by foreign exchange losses, totaling Ksh15.3 billion, influenced by the depreciation of the Kenyan shilling against the US dollar. Although the management was able to celebrate a remarkable operating profit of Ksh998 million, a positive shift from a Ksh5billion operating loss, these gains were overshadowed by foreign exchange losses.
KQ’s operating costs increased by 39.5%, reaching Ksh74.1 billion, nearly offsetting its generated revenues. The operating profit and interest income of Ksh998 million and Ksh114 million, respectively, fell short of covering the Ksh15.32 billion foreign exchange losses and finance costs incurred during the reviewed period.
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Furthermore, the airline is dealing with impending debt obligations, volatile fuel prices, a weakening shilling, and a substantial negative equity of Ksh133.2 billion, rendering it technically insolvent. With liabilities worth Ksh124.8 billion due in less than a year and an additional Ksh176.8 billion in long-term liabilities, the airline is relying on government support.
Despite revenue growth, the surge in costs and an estimated US dollars 1 billion (approximately Sh145 billion) debt have hindered its efforts to achieve profitability. The airline has been consistently reporting half-year losses over the past 11 years, with the current results being the most severe, emphasizing its challenges in achieving break-even next year.
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Over the past few years, KQ has accumulated losses totaling Sh111.9 billion, with a record full-year loss of Sh38.2 billion in the previous year. The depreciation of the Kenyan shilling against the US dollar has further impacted the airline’s financial position, creating an Sh18.9 billion deficit in its financial books.
