News

kenya airwaysNational Treasury seeks to understand what happened at Kenya Airways before coming up with bailout plan
Kenya Airways will be scrutinized by the National Treasury before any bailout plan is put in place, Cabinet Secretary Mr. Henry Rotich has said.
In an interview with the press, Mr. Rotich said the National Treasury would like to find out how the national carrier incurred such a huge loss announced last week before considering a bailout.


He said his Ministry won’t just inject funds before understanding fully the situation after it emerged the firm will require Sh60 billion to bring it back to profitability.
“We are seeking to understand what exactly led to Sh25.7 billion loss and what intervention is needed to turn around the airline’s financials”, said Mr. Rotich.
The Ministry and contacted auditors will investigate the airline over its cost structures, including leases, fuel purchasing plans and staff remuneration to determine the exact figure to revive the airline.
Mr. Rotich added: “We are also going to review our level of involvement with the board, and any neglect will definitely lead to an overhaul”.
He said the environment under which KQ has been operating is very challenging but with a solid plan, the firm would be turned around. He added that the national airline’s management and the National Treasury would heavily rely on the expert’s plan to make the firm realize profits.
The national carrier the Kenya Airways has therefore flown deeper into turbulence in what is the biggest loss ever made in the history of corporate Kenya and East Africa. Bullish fleet expansion, coupled with a weak shilling and fuel prices volatility are being faulted.
Other factors which affected the performance of Kenya Airways were stiff competition from Gulf and other local carriers, Ebola menace in West Africa, partial closure of Jomo Kenyatta International Airport runway and travel advisories that bruised the tourism sector.
The airline told an investor briefing that fleet ownership costs doubled to Sh26 billion, compared to Sh12.5 billion in 2014, arising from a fleet renewal plan. Included in the fleet costs are impairment and other costs associated with the retirement of aircraft.
Overheads increased from Sh2.1 billion to Sh24.5 billion driven by support costs for the expanded network and additional fleet, including the Dreamliners.
“Out of these losses, Sh13.5 billion was a one-off item which included Sh5.8 billion hedging adjustments”, KQ group finance officer Mr. Alex Mbugua said during the briefing.
During the period under review, loss per share also went up to Sh13.35 from Sh2.25 meaning a portion of the company’s loss allocated to a share has also increased.
Signs that Kenya Airways, the ‘Pride of Africa’ was in trouble emerged earlier when it announced a pre-tax loss of Sh12.5 billion for the half-year ended September 30, 2014, in contrast to a net profit of Sh384 million it made the year before.
KQ’s top management include board chairman Mr. Evans Mwaniki and Chief Executive Officer Mr. Mbuvi Ngunze.
        o………………………………………………Ends……………………………………….o