Nairobi, Kenya: Kenya Airways, the national airline of the East African nation, is caught in turbulent financial weather. On Tuesday, it announced a substantial surge in losses for the first half of the financial year. The core reason, as stated by the airline, is the rising foreign exchange and borrowing costs.
The national flag carrier, in which Air France-KLM holds a stake, has grappled with immense debt for years. This, despite multiple government interventions and bailouts to save the airline. As per the airline’s latest report, pre-tax losses for the six-month period ending June 30 reached a staggering 22 billion shillings ($151 million). This is a sharp rise from the 9.9 billion shillings recorded a year prior.
What is surprising, however, is that this steep loss came amidst a notable uptick in revenues. But this revenue was majorly consumed by legacy debts and the depreciating shilling. Since January, the Kenyan shilling has plummeted more than 14%, affecting businesses across the board.
Allan Kilavuka, Chief Executive of Kenya Airways, commented on the situation: “The significant devaluation of our national currency has strained our finances. With most of our transactions conducted in major foreign currencies, we’re feeling the pinch.” He highlighted that due to the shilling trading at a record low (145 to the dollar), overhead costs for the airline shot up by 22%.
But it’s not all gloomy for the airline. On the bright side, total revenue swelled by 56%. This boost can be attributed to the rise in passenger figures – 2.3 million in the first half of this year compared to 1.6 million in the previous year.
Kilavuka remains hopeful. “Our strategy moving forward involves reinforcing our capital structure. This is essential for grounding Kenya Airways and creating a robust foundation for future growth,” he said. The airline chief also emphasized the airline’s commitment to expand its network and fine-tune its fleet. This, he believes, would help scale both passenger and cargo capacities. He expressed positivity regarding the bookings anticipated for the latter half of the year.
Kenya Airways, which carries the slogan “The Pride of Africa”, last saw profits in 2012. As of now, trading of its shares is on hold as it works tirelessly to revive its profitability.
The pause in share trading started in 2020 when there were discussions in the legislative chambers about the government fully acquiring the airline. This proposal, however, was later shelved. The Kenyan government currently holds a 48.9% stake in the airline, while Air France-KLM owns 7.8%.
Established in 1977 after East African Airways ceased operations, Kenya Airways now connects 42 destinations, 35 of which are in Africa.