Why KQ has turned into a loss-making venture

There are times companies rise and fall, make profit and losses. What if a company makes losses year in year out? Its existence will beat logic.

Kenya Airways posted a Sh7.55 billion net loss for year ended December 2018 as higher costs offset a jump in revenue.

That was not the first place the airliner has been making huge losses. Historically, the company has been struggling to survive in the competitive air business and from time to time the company has resorted to corporate downsizing, retrenchments and its woes have remained ‘constant.’

The carrier’s full-year results do not have a comparable period because KQ, as the airline is known by its international code, in 2017 changed its reporting period from ending in March 31 to now end in December 31.

However, KQ had made a net loss of Sh6.41 billion in the 9-month period between April 1 and Dec 31 2017.

The company’s revenue in 2018 hit Sh114.18 billion, largely driven by passenger bookings. Its revenue in the previous 9-month period stood at Sh80.7 billion.

It’s total operating costs stood at Sh114.87 billion in the period under review.

“Fuel, personnel and the cost of aircraft remain the top three drivers of airline costs contributing to about two thirds of total operating cost for the airline,” chairman Michael Joseph said in a statement.

The carrier also cited fuel costs, which rose 73.6 percent to Sh33 billion, as a major challenge.

In August 2018, KQ reported Sh 4 billion net loss from Sh5.6 billion recorded same period the previous year.

The Chief Executive Officer Sebastian Mikosz singled out fuel price volatility as main challenge

“Our loss before tax is down by 30 percent. We keep slowly but steadily improving,” Mr Mikosz revealed.

Poor management decisions, operational inefficiencies and failure to counter competition were believed to have caused the such huge losses. In 2015, the company lost Sh25.7 billion.

Preliminary evidence gathered by a Senate Select Committee tasked to look into the airline’s operations revealed strategic errors that led to the near-collapse of Kenya’s flag carrier after its loss figure grew more than 600 per cent in one year.

The then committee chairman, Prof Anyang’ Nyong’o (Kisumu senator), said the meetings held with KQ management, so far, had given crucial indicators on what is ailing the airline, which is surviving on huge debts.

“Prima facie evidence shows the airline faces major problems like poor investments decisions by management on the buying and leasing of aircraft,” said Prof Nyong’o.

The airline is also said to be involved in expensive and non-competitive ticketing, which led to loss of passengers.

Kenya Airways is also faulted for its failure to explore more African routes.

The Senate also observed that frequent industrial unrests by employees prevented the creation of a healthy business environment.

Poor customer relations is also said to have failed KQ, as well as frequent cancellation of flights, which is blamed for lack of passengers.

Why the loss-making KQ wanted to take over JKIA? MP Babu came out to support the recent JKIA strike

Leave a Reply

Your email address will not be published. Required fields are marked *