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Kenya Airways incurs losses due to foreign exchange, borrowing

Ibukunoluwa Bankole by Ibukunoluwa Bankole
August 31, 2023
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Kenya Airways, the ailing national airline of Kenya has incurred a significant rise in losses during the first half of the financial year as a result of increasing costs associated with foreign exchange and borrowing. 

The airline announced this on Tuesday while lamenting the challenges faced by the aviation company.

The airline, which is partially owned by Air France-KLM, is struggling under a pile of debt and has been suffering losses for years despite receiving several bailouts from the government. Air France-KLM owns a portion of the airline. 

The airline said that its pre-tax losses for the quarter that ended on June 30 increased by more than double to 151 million dollars or 22 billion shillings from 9.9 billion shillings a year earlier. This was the case in spite of a discernible rise in receipts, which were swallowed up by legacy debt and a depreciating shilling, which has lost more than 14 percentage points of its value since January. 

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Impact of shillings devaluation on Kenya Airways

“The devaluation of the Kenyan shilling has a significant negative impact on our financials as the majority of our transactions are carried out in the major foreign currencies,” said the chief executive of the airline, Allan Kilavuka. “Our transactions are carried out in the major foreign currencies.” 

According to him, the increase in overhead expenses was due to the shilling’s current exchange rate of 145 to one dollar, which is at an all-time low. 

According to the airline, the increase in total income was attributed to the rise in passenger numbers from 1.6 million in the first half of the previous year to 2.3 million in the same period this year. Kilavuka stated that “our focus looking ahead is on recapitalizing the business to place Kenya Airways on a stronger footing and provide a stable base for long-term growth.” 

“Our focus looking ahead is on reinvesting in the business to place Kenya Airways on a stronger footing,” “We will continue to focus on our network expansion and fleet optimisation to increase passenger and cargo capacities,” he added, expressing confidence in regard to the forward reservations for the second half of the year. “We will continue to focus on our network expansion and fleet optimisation to increase passenger and cargo capacities.” 

Origin of Kenya Airways

Kenya Airways Limited  was established in January 1977 after the dissolution of East African Airways Corporation (EAA). EAA had been established in 1946; the government of Kenya was the key shareholder with a 68 percent interest. Uganda had a 23% share, with the rest held by the precursors to the state of Tanzania (Tanganyika and Zanzibar).

While the creation of Kenya Airways provided a national airline, the carrier over time was known as a textbook case of inefficiency. Among other problems, it operated a varied fleet of a half-dozen different types of planes, each requiring distinct maintenance, spares, and training procedures. The airline lost KES 5.8 billion from 1987 to 1993, a considerable drain on the national economy.

19 years after (2012), Kenya Airways, whose tagline is “The Pride of Africa,” made its last profit, as reported by the airline this August.

Kenya, Rwanda, 15 nations participate in new global air transportation sector

Kenya Airways now

While the airline works hard to go back to being profitable, trading in its shares will continue to be halted. The shares were initially put on hold in the year 2020 while politicians deliberated on a proposal, which has since been abandoned, that would have given the state complete ownership of the airline. 

Kenya Airways is owned by the government to the extent of 48.9 percent, with Air France-KLM holding 7.8 percent of the company. The carrier currently operates flights to 42 different locations, with 35 of those locations being in Africa. 

Tags: borrowingForeign exchangeKenya Airways
Ibukunoluwa Bankole

Ibukunoluwa Bankole

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