Kenya Airways 2018 results

Excerpts from the announcement of the Kenya Airways 2018 financial results April 30, 2019 at Ole Sereni Hotel. Nairobi at a breakfast event with investors and media.

Performance: 2018 revenue was Kshs 114 billion (~$1.14 billion), compared to 81 billion in 2017 at the airline, which is in the middle of discussions about taking over the management of the Jomo Kenyatta International Airport (JKIA) under a public-private partnership (PPP).

Chairman Michael Joseph said 2018 had been a challenging year, one highlight of which was the launch of non-stop daily flights New York, but there was a lot media scrutiny on PPP on JKIA that was wrong and excitable. He said that the airline was on the right path and thanked the staff for doing a great job under difficult circumstances.

CEO Sebastian Mikosz said this was the second year of growth in passengers and cargo and a narrowed loss. The difference to 2017 (which was abbreviated to 9 months as the airline changed its financial year-end to match IATA and its financial partners) was stark but the CEO went out of his way to compare unofficial twelve month numbers for 2017 to highlight that the airline had increased income, and flown more passengers despite the smaller fleet in 2018. They had 13,258 daily customers (up from 12,484),  a cabin factor of 76% and on-time performance 79%.

They earned Kshs 95 billion from flying 4.84 million passengers in 2018, Kshs 8.5 billion from cargo 8.5 billion and earned Kshs 10 billion from other business including ground handling and repairs and maintenance and training,. While the revenue covered their fleet ownership, fuel and staff costs, they ended with an operating loss of Kshs 683 million and, an overall loss before tax of Kshs 7.5 billion ($75 million).

Fuel: Accounts for 40% of costs, and as prices went up 30% in 2018, it remains one of the biggest challenges to profitability. As such they are going back to fuel hedging as a risk minimization strategy.

Fleet: They are getting back two Boeing 787’s from Oman Air but have extended an ongoing lease with Turkish to retain three Boeing 777-300’s which are simply too large to operate given the current loads and will introduce a complexity  that is not desirable now.

Routes and Partnerships 
  • The New York direct flight route had flown 15,000 passengers as of December 31 2018. The load factor is 64% and CEO said that there was nothing lucrative about NYC but it helped serve the Africa Market with 5 weekly flights which they will adjust back to being daily flights in the summer. The non-stop route offers the fastest route between New York and Indian Ocean destinations countries like Mauritius
  • The Air-France-KLM joint venture is still the biggest part of their business. They have now added one with Delta enabling KQ to sell flights to Delta destination cities beyond New York.
  • UN: With the addition of Geneva (and Rime) in June, they will now fly to all the main UN cities – Geneva, Mogadishu, Paris, New York – from Nairobi, completing their UN network.
  • JamboJet: They are trying to pushing to get their Jambojet subsidiary IOSA-certified so they can codeshare on more local routes.

African Aviation: The results presentation showed comparisons to Rwandair, Ethiopian, Turkish, Ethiopian and Emirates airlines, but Mikosz said that KQ was the only airline interested in growing the Nairobi hub. The CEO cautioned that while in 2010, Ethiopian was the same size as KQ, today it was three times bigger, and that was due to support systems, Also that Rwandair, while considered small today, will catch KQ in five years unless KQ grows its hub in this competitive environment.

PPP: The fate of the public-private partnership proposal for the airline to manage JKIA is still with the Privatization Commission who turned it over to Parliament for public hearings that were stormy at times and led to a lot of inaccuracies. The CEO and Chairman said it was not necessary for the growth plan that the company had presented to shareholders during their 2017 restructuring, but it was one which would accelerate its rate by levelling the playing field with its continental peers.

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