Kenya Airways eyes profitability in the next two years

Kenya Airways passenger plane at JKIA. [Wilberforce Okwiri, Standard]

National carrier Kenya Airways expects to get back to profit in 2024.

The airline, which has made losses for 10 consecutive years, yesterday told shareholders that its turnaround plans are bearing fruit and is set to further reduce costs as well as grow revenues that will see it end a dividend drought in about two years.

Chief Executive Allan Kilavuka said they expect to cuts losses this year as the aviation industry recovers from Covid-19, as well as through cost-cutting initiatives including renegotiating terms for leasing aircraft.

“We anticipate that we will be able to break even by 2024 with all the work that is ongoing (which) entails dealing with legacy issues mostly around cost, which are structural and complicated to deal with but we hope that by 2024 we will have broken even,” he said during the company’s annual general meeting.

“From then on, we have good basis for growth.”

Mr Kilavuka said the airline has made progress in talking with most of its aircraft lessors and expected to close the negotiations by end of this month.

The new terms with the leasing firms are expected to see KQ save on the aircraft ownership costs, with the expectations being a shift from fixed payment for using aircraft to pay per use.

“We are also working on reduction of other costs such as distribution and ground handling costs by dealing with the inefficiencies in these areas,” he said, adding that the carrier is unlikely to cut its employees as it is currently not bloated.

“We have also looked at the productivity of our employees in terms of how we can be more productive. This is unlikely to result in staff reduction.”

“We did a voluntary exit exercise in 2020 and did not renew some of the contracts from the contracted staff and so as it stands, we do not have a bloated staff.”

The carrier is also optimising its fleet and network of routes, which might reduce the routes it flies as well as the number of aircraft it operates.

The CEO said the bookings for 2022 remained up, defying the trend during election years when tourism and travel experience major slumps.

KQ Chairman Michael Joseph said the airline is hoping to quit reliance on bailouts from the government.

He told shareholders that KQ had made a commitment to the National Treasury that it will be financially sound within the next two years and no longer depend on the government.

“We also recognise that due to legacy issues, we have been a drain on the exchequer. We expect to move out of that situation and become profitable and self-financing ... we believe that we will no longer be dependent on Treasury and therefore on taxpayers to keep us going,” he said.

The airline last year received a total Sh14 billion from the government to help it withstand the harsh impact of Covid-19 and over the years, this adds up to tens of billions of shillings.

The carrier is still pursuing a partnership with South African Airways to co-found the Pan African Airline Group.

Mr Joseph chairman said once this is off the ground, the two carriers would bring onboard a third airline, preferably West African.

“What we want to do is create a truly African airline to provide connectivity within the continent. We will make savings and become competitive this way,” he said.

“Before we get there, we need to improve and take out all the challenges that we can foresee.”