National carrier Kenya Airways (KQ) has returned to profitability, reporting a net profit of Ksh 513 million for the first six months of the financial year ending 30 June 2024. It’s a first since 2013, when Kenya Airways (KQ) reported a net profit of KShs 384 million in the first six months of the year. This was a remarkable performance for the airline. However, since then, KQ has faced persistent financial challenges, resulting in consecutive years of net losses.
The recently reported 102% profit gain represents a remarkable turnaround from the Ksh 21.7 billion loss the airline reported in the same period last year. This success is largely attributed to Project Kifaru, a strategic plan that emphasises customer obsession, operational excellence, financial discipline, innovation and sustainability.
“The impressive performance reaffirms the operational viability of our business and undescores the effectiveness of the collective efforts by our Board, management and staff,” said Kenya Airways Chairman, Michael Joseph.
Joseph added that the airline remains focused on completing its capital restructuring plan to reduce financial leverage and improve liquidity, thereby creating a strong foundation for long-term growth and stability.
Kenya Airways also attributes its success to the government’s intervention which has significantly reduced the airline’s debt burden. During the 2022/23 financial year, the government provided Kenya Airways with Ksh12.3 billion in guaranteed debt coverage. This amount includes Ksh10.6 billion for principal and Ksh1.7 billion for interest.
Felix Okatch, a multilateral trade expert, notes that the 513 million profit is a relatively small part of the airline’s overall earnings. He stresses that despite the substantial profits, poor management could still pose a significant risk, with the potential for losses if management practices are not improved.
“If management is not focused on achieving what is expected of them, they will lose. This profit is a small thing. They should do better.”
Despite its current debt burden, Kenya Airways aims to expand its fleet by 30 to 40 per cent and increase its destinations from the current 48 to more than 60 over the next five years. For the airline to remain profitable, it needs a capital injection to enable it to pay its debts.
Meanwhile, the Kenyan government recently proposed a deal with India’s Adani Airport Holdings to develop Kenya’s main airport, Jomo Kenyatta International Airport (JKIA). Currently, JKIA is exceeding its capacity of 7.5 million passengers a year and that urgent improvements are needed. The government’s statement highlighted issues such as leaking roofs, which have caused what has been described as an “international embarrassment”. This underlines the critical need for upgrades to improve both the airport’s infrastructure and the passenger experience.
Okatch points out that the government’s proposal was recommended by the World Bank. He argues that giving Adani the project to develop JKIA will not help the airline much, citing the need to manage the airline’s resources “ourselves”.
“We think giving this project to Adani will help us, it will not. The 2010 Constitution is the best document Kenya has ever had, it shows us how to manage our resources and seek what is good for us. For the Adani project to come in, we need public participation first.
In challenging market conditions, there are lessons to learn from Ethiopia and Egypt. Both Ethiopian Airlines and Egypt Air have achieved profitability this year. Ethiopian Airlines has distinguished itself with a notably successful strategy. It has expanded its operations beyond passenger flights to encompass cargo, maintenance, repair and training services. These initiatives have generated multiple revenue streams and propelled the airline to become one of Africa’s largest and most financially successful carriers.
Others have not been so lucky. South African Airways (SAA) has accumulated losses totalling around $ 1.2 billion for the period 2018-2022. The airline has also faced credibility issues in its financial reporting due to transparency issues and allegations of mismanagement and corruption. Recently, plans to sell a 51% stake in South African Airways (SAA) to the Takatso Consortium as part of a rescue package failed. The plan was intended to alleviate SAA’s financial distress and operational problems through private investment and management expertise. It remains to be seen whether the airline will rise from the ashes.
On its part, despite reporting profitability, Kenya Airways continues to face significant challenges affecting its operations. These include the impact of M-pox on travel demand and public health measures. In addition, currency fluctuations create financial instability by affecting the cost of foreign currency debt and impacting overall profitability. Geopolitical tensions could further complicate operations by disrupting travel routes and increasing operational risks. These concerns highlight that sustainable profitability depends on effectively managing these complex issues.
