Kenya Airways looking to cut costs after profits fall

Kenya Airways, Africa’s third-biggest airline is looking to implement cost-cutting measures affecting staff, procurement, and fuel use.

This comes after a sharp rise in its fuel bill hit annual profits by over 50 percent.

Chief executive officer Titus Naikuni revealed the cost-cutting measures would be far-reaching and affecting procurement, staff productivity and fuel costs but would be preceded by a thorough review of the airline’s cost structures.

“You can’t let costs run away with you,” he told an investor briefing after the company reported a 57 percent drop in pretax profits in the year to end-March to 2.15 billion shillings (US$ 25.3 million), after oil prices jumped during the period, sending its direct costs up by 44 percent to 77 billion shillings (US$ 906 million).

Revenue increased by a quarter to 107 billion shillings (US$12.5 billion), buoyed by higher passenger and cargo traffic.

Earnings per share dropped to 3.58 shillings (US$ 0.04) from 7.65 shillings (US$ 0.09) and the dividend was cut by 16 percent, but will go to the holders of a billion new shares issued in this month’s $250 million cash call to fund its expansion plans. Some 70 percent of the rights issue was taken up by investors.

Kenya Airways said a move to bring together carriers under the African Airlines Association to buy fuel jointly in bulk, would save it US$2 million this year, adding they would also carry on with fuel hedges in order to manage the costs.

Analysts said focusing on costs was the right step, adding that next year’s delivery of the first of nine 787 Dreamliner planes ordered from Boeing Corp., would also cut costs since the planes are more fuel efficient.