Kenya Airways recently announced its 2024 full year results. It made a net profit of Ksh 5.4 billion. Because this is the first profit after more than a decade of loss-making, it has elicited a lot of online chatter. Whilst most are extremely ecstatic about these good tidings, others have cast aspersions on the figures. These are the facts as they obtained in the investor briefing.
1. The profit is real. Kenya Airways does not engage in creative accounting.
First, because it is illegal. Second, Kenya Airways books are subjected to both internal and external audits from internationally reputable firms like PWC. Moreover, KQ’s accounts are publicly available for scrutiny on its website. KQ also keeps its books in accordance with International Financial Reporting Standards. A deficit of accounting knowledge perhaps creates any misimpression to the effect that it has cooked its books.
2. KQ’s great results did not happen overnight.
They are the result of several years of restructuring, which culminated in Operation Kifaru, which started in 2020 and is now in its second phase.
3. Operation Kifaru was essentially a “stop digging the hole” process.
This entailed an imbuing of operational efficiencies through route rationalization (cutting back on low traffic routes to concentrate on lucrative ones). It also focused on other aspects of cost optimization even as it grew passenger and cargo numbers evinced by a Cabin Factor of 75.2% and 71 thousand tonnes of cargo uplifted, which is a 25% increase over the previous year.
4. It is true that KQ benefitted from a favourable forex exchange regime.
This contributed to an increase of Ksh 1.2 billion to the airline’s coffers. But even without that benefit, KQ would still have made a profit of Ksh 4.2 billion. Still, when Total Operating Costs of Ksh 171. 874 billion are subtracted from the airline’s Total Income at Ksh 188.485 billion, an Operating Profit of Ksh 16.621 billion results, proving that the business is viable.
5. Going forward, KQ has been cushioned from foreign exchange fluctuations through actions of the Government of Kenya.
The government has taken up a portion of KQ’s dollar loans guaranteed by it and is now settling them. KQ is paying back the government with interest and in Kenya shillings in a process called a novation. This will help to make KQ’s progress sustainable.
Responsibilities and obligations of airline passengers
6. Apart from the flying business, KQ also has other income streams.
It does Maintenance, Repairs and Overhauls for not only its fleet but also for aircraft for other airlines and jurisdictions. Recently, KQ received certification from the European Union Aviation Safety Agency allowing it to service planes that originate from the European Union.
7. Following the success of Operation Kifaru 1, Phase 2 of the same is ongoing.
It entails paying down KQ’s legacy debt incurred in the turbulent period of the ill-fated Project Mawingu and recapitalizing the business to acquire new planes even as new routes are added. The airline intends to increase its fleet to over 50 planes in the next few years.
8. KQ as anchor tenant of Jomo Kenyatta International Airport, must grow in tandem with Kenya’s premier airport.
The government has indicated that it is looking for a strategic investor for both airline and airport. This is in keeping with best practice globally where major airlines are synonymous with their hubs. For instance, Emirates Airlines immediately evokes images of Dubai and BA, Heathrow Airport in London.
9. KQ has an environmental sustainability programme where recycled plastic is used to manufacture pyro-diesel.
This diesel is used to power the airline’s ground-handling equipment. KQ was also the first African airline to fly a long-haul commercial flight from Africa to Europe using Sustainable Aviation Fuel. With these initiatives, the airline is future-proofing itself.
10. Africa has 17 percent of the world’s commercial airlines yet it commands less than 3 percent of global air traffic.
In other words, the continent has more airlines than is necessary. The future lies in consolidating these numerous airlines to a few dominant airline groups. To that end, KQ is in talks with South African Airlines to form one pan African airline group. It is hoped that others will soon join in so that economies of scale benefits can be enjoyed. This will lead to greater efficiencies, wider reach and more competitive fares for citizens of the continent. The future is bright and KQ is right in the middle of it!
