Growth trajectory: KQ is making steady progress

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Kenya Airways, KQ recently reported its FY2018 earnings, demonstrating consecutive growth in revenue and narrowed losses even as global report shows African airlines operated at 10% below the estimated average in 2018.

The 2018 results are the first since the airline adopted a new financial reporting format to comply with International Accounting Standards (IAS 1, IAS 36 & IAS 37). The Group’s and Company’s financial statements include a restatement of the opening balances as at 1 April 2017.

The statement of profit or loss and other comprehensive income figures and statement of financial position for the year ended 31 December 2017 have also been restated.

Kenya Airways recorded total revenue of Ksh.114.18billion, where passenger and cargo revenue contributed to Ksh.95.1billon and Ksh.8.5billion respectively.

The airline earned Ksh.10billion from other lines of business including; Ground handling services, Maintenance Repairs and Overhaul (MRO) and Training, amongst others Fuel, personnel and the cost of aircraft remain the top 3 drivers of airline costs contributing to about two-thirds of the total cost. Of these costs, fuel remains the most volatile and most airlines continue to hedge fuel prices to protect themselves from the volatility.

In 2018, the cumulative direct operating costs (DOCs) stood at Ksh.75billion, with fuel cost taking up Ksh. 33.06 which is about 44% of the total cost of operation.

“Oil prices increased significantly in 2018 to a three-year average peak of US$86/bbl (Brent Crude) in October before falling back down to a low US$51/bbl in late December 2018. Had the oil prices remained constant, within the 2017 range, we would have recorded significant savings in fuel cost within the year. This would have been a much-needed positive recording in our bottom line”

Kenya Airways’ full year earnings for 2018 stood at a loss of Ksh.7.56 billion.

Mr. Mikosz however pointed out that while the drop in the oil price during the fourth quarter of 2018 gave airlines a slight reprieve, there is concern that they will rise again.

“We have a dedicated team looking at multiple solutions to cushion the airline against the shock of potential further rise in fuel cost and forex volatility in 2019. We are very optimistic that the turnaround strategies we have employed will deliver results.” Mikosz added.

Cost of fleet ownership was recorded at Ksh.18.9billion and overheads including wages stood at Ksh.20.9billion. Operating profit margin has changed from 1.2% in the 9-month period ended 31 December 2017 to -0.6% in the year ended 31st December 2018.

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