Business
Kenya Airways posts $56 million half-year loss
The loss was larger than anticipated but analysts said the airline’s outlook remained positive, especially in the wake of recent cost cutting measures and capacity rationalization that has seen the carrier reduce frequency on selected routes.
“The loss was more than we expected, with the major surprise being the decline in revenues,” said Eric Musau, an analyst at Standard Investment Bank. “But the carrier has held its ground reasonably well compared to other players in the industry.”
Kenya Airways share price dropped 3.6 percent to KSh12 (US$0.14) from Sh12.45 (US$0.15) as investors absorbed the news of the massive loss but later clawed back some of the losses in late afternoon trading.
The airline, which is 26.73 percent owned by Air France-KLM and is one of Africa’s largest, hopes to reverse the loss-making trend by the end of the financial year but Mr Naikuni said that would depend on many factors, including the operating environment that is underlined by volatility of fuel prices, and the euro zone crisis.
Kenya is also poised for a possible heightening of political temperatures ahead of the March 4, 2013 presidential elections.
Fuel price volatility and cost management are therefore expected to top the list of challenges for the airline this second half of the year. Fuel cost remains Kenya Airways’ largest expenditure item, accounting for 39 percent of total operating costs.
The airline’s wage bill has risen steadily since 2007 from KSh6 billion (US$70 million) to KSh13.4 billion (US$157 million) at the end of last year due to a collective bargain agreement it signed with the workers’ union.
