Kenya Airways seeks capital investor as fortunes change

 

Kenya Airways (KQ) operating profit is now sound and the firm is currently scouting for a strategic capital investor to fully turn around the business, according to the Chief Executive Officer Allan Kilavuka.

In an exclusive interview, Kilavuka said the airline has been focused on improving customer experience, operational excellence, and cash conservation.

"Other initiatives undertaken by the management include partnerships with other airlines, lease rental renegotiations, and other cost-reduction measures,'' he said. 

He said the airline also exploited opportunities to raise revenue through passenger charters and ramped up scheduled operations.

The measures saw the airline report an operational profit for the first time in six years in the first six months of 2023. 

According to financial results for the period to June last year, the airline recorded a 120 per cent improvement in operating profit from a loss of Sh5 billion reported in 2022 to Sh998 million in 2023.

During the period under review, the group's revenue grew to Sh75 billion, recording a 56 per cent increase compared to the same period last year.

The operating improvement was underpinned by a growth in the cabin factor to 76.1 percent, with an increase in passenger numbers of 43 percent to 2.3 million. 

"These results confirm the operational viability of the airline. We have enhanced our customer experience at different touch points, and the reliability and availability of our aircraft have significantly improved licenses."

He added that 0n-Time Performance (OTP) has gone up from a low 58 per cent at the start of the year to 77 per cent at the end of June with a target of being above 80 per cent.

"Our focus looking ahead is on recapitalising the business to place Kenya Airways on a stronger footing and provide a stable base for long-term growth."

He added that they would continue focusing on the airline network expansion and fleet optimization to increase passenger and cargo capacities. 

Last week, the airline inked a deal with travel intelligence and omnichannel distribution company ARC, to upgrade its booking platform.

The move seeks to enhance KQ's New Distribution Capability (NDC), a system that allows airlines to seamlessly generate and share offers with customers across various channels.

"This will provide a more advanced and comprehensive experience for our corporate travel buyers and travel agencies,'' Kilavuka said. 

Other measures include codeshare agreements, with the latest one being with Air Europa, the third-largest Spanish carrier, to extend its reach in Europe and the United States of America.

The new agreement will allow Air Europa passengers to fly to Nairobi from Amsterdam as well as allow Kenya Airways guests to fly to Madrid, Palma de Mallorca, New York, and Miami.

In December, it extended its codeshare partnership with South African Airways (SAA) to include direct flights from South Africa to South America. 

Passengers are now experiencing a seamless travel journey to Sao Paulo, Brazil, via Johannesburg on one ticket, as KQ codeshares on the recently reintroduced South Africa Airways flight to Sao Paulo (GRU).

"This collaboration establishes unparalleled connectivity, offering the most direct flight option from this region, contrasting with current routes that often involve transits through the Middle East, Europe, or North America."

Besides, next week, the national carrier will resume non-stop flights to Mogadishu, Somalia, after a three-year break. 

It will fly three times weekly to Mogadishu. The flights will be scheduled every Monday, Wednesday, and Saturday starting from $1050 (Sh160,751). 

The airline's improved performance was negated by a Sh17 billion impact on foreign exchange losses on monetary items; loans and leases, giving rise to a loss before tax of Sh22 billion.

According to Kilavuka, the legacy debt and the devaluation of the Kenya shillings against major currencies are two concerns that continue to hold back the airline. 

"We are working on this to ensure we are fully recovered by 2025. Unlike in 2017 when we undertook a debt restructuring, we are currently focusing on capital injection,'' Kilavuka told the Star. 

BY  VICTOR AMADALA