Business

Kenya Airways forecasts 20% rise in revenue

One of Africa’s biggest airlines, Kenya Airways, narrows losses occasioned by COVID-19 as the carrier expects a 20 per cent rise in revenue in 2022, according to its CEO, Allan Kilavuka.

 

The carrier, in which government has a 48.9 per cent stake, saw revenue go down by half at the height of the pandemic in 2020 as airlines around the globe were forced to ground their airplanes. Kilavuka said: “We have been through the worst patch,” adding that passenger revenue had grown 21 per cent in 2021 as recovery started.

The improving situation helped the airline to narrow its loss by a fifth during the first half-year, but it still lost $101 million during the six months. The airline slipped into insolvency long before the pandemic, mainly due to an expansion drive that saddled it with hundreds of millions of dollars in debt to finance the purchase of new planes, followed by travel warnings in 2013 due to insecurity in the country.

Aviation consultant, Seabury, was hired last month to advise on returning to profitability and its report is expected in the next three weeks, Kilavuka said.
“We are looking for a more efficient airline. The network should not lose money,” he added.

Forward bookings for the peak summer travel season are promising, he said, adding the airline was hoping an election in Kenya scheduled for August 9 would not cause disruption. Two out of the last three elections in Kenya saw significant violence, hurting the travel industry and the wider economy. This year’s Kenya Airways growth forecast is dependent on no further travel disruption or restrictions caused by any new coronavirus variants, the CEO said.

 

Although African carriers are starting to see a recovery, the continent’s airline industry is lagging that of Europe, Asia and the United States, Kilavuka said. Cargo, which accounts for some 10 percent of revenue at Kenya Airways, performed well during the pandemic, he said. After passenger demand slumped the airline converted two passenger jets to carry goods. But Kenya is still suffering from a 40 per cent deficit in required cargo capacity, he said, adding European operators who previously served the country had opted for more lucrative routes between China and the West.

 

Government is seeking to take over $750 million of Kenya Airways debt, which it had guaranteed in 2017, as part of the restructuring effort, Kilavuka said. However, it will still be dependent on direct government support in its fiscal year ending June 2022 and the following year, as Kenyan Finance Minister, Ukur Yatani, noted in December, underscoring the need for cost-cutting measures.

 

Kilavuka said efforts to turn around the airline would involve a critical look at staffing and the renegotiation of contracts with suppliers and plane leasing firms.

 

During the lockdown, the airline converted some of its Boeing 787 aircraft into freighters. However, they did not remove seats to accommodate more freight. The move could only see the carrier ferry close to 50 percent of goods.

 

In 2021, Kenya Airways’ cargo revenues went up by 60 per cent due to a strong focus on freighter operations in 1H21. The group has been able to uplift an increased 500 tonnes monthly, showing its cargo division’s outstanding agility in adapting its operations to provide air freight services in this new environment.

 

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