Kenya Airways PLC (KQ) has released its Full Year financial results for the year ending December 31st, 2022. The results were announced at a virtual investor briefing, where the airline reported revenues of KES 117 billion, representing a 66% increase from the previous year. However, this is 5% below the pre-pandemic reported revenue, indicating the Group’s projected recovery by 2024.
The growth in revenue was driven by a significant increase in passenger numbers, which grew by 68% to 3.7 million passengers, and over 65,000 tonnes, a 3.5% increase in cargo tonnage. The deployed capacity in Available Seat Kilometers (ASKs) also increased by 75%, closing the year 2022 at 10.3 billion compared to 5.9 billion reported for the same period in 2021. As a result, passenger load factors for 2022 were only 3.9 percentage points below the load factors achieved before the pandemic in 2019.
The increase in revenue was attributed to the lifting of COVID-19 travel restrictions and pent-up travel demand globally. The airline increased frequencies across its network, resulting in a strong and sustained recovery in performance compared to a similar period in the prior year. In addition, global passenger traffic recovered from 41.7% of 2019 levels in 2021 to 68.5% in 2022.
Despite the opening up of markets post-COVID, the aviation operating environment was affected by fuel costs that increased by 160% year on year, deterioration of the dollar, and its effect on direct operating costs and global geopolitical issues. The tight forex demand had a significant impact on Kenya Airways’ financial transactions, which are mainly carried out in the major foreign currencies, specifically the devaluation of the Kenya Shilling.
According to Group Managing Director and CEO Allan Kilavuka, the airline would have reported a profit at the operating level notwithstanding the impact of the aforementioned challenges that included the devaluation of the Kenya Shilling against major currencies. The airline recorded forex losses occasioned by the restructuring of the guaranteed Government of Kenya loans as part of the ongoing financial restructuring program, negatively impacting the income statement by Kes. 26.4 billion.
KQ is addressing legacy issues to turn the airline around. The specific areas include debt restructures, reducing the high cost of operations, lease cost reduction, operational excellence, customer excellence, employee experience, and diversification – Over the next 5 years, KQ will continue to diversify its revenue streams. The target is to grow the cargo business to contribute 20%, up from 10% today. These measures are aimed at achieving the airline’s goal of turning the business around by 2024.
According to the International Air Transport Association (IATA), a return to profitability is expected for the global airline industry in 2023 as airlines continue to cut losses stemming from the effects of the COVID-19 pandemic on their business in 2022. As a result, in 2023, airlines are expected to post a small net profit of $4.7 billion—a 0.6% net profit margin. It is the first profit since 2019 when industry net profits were $26.4 billion (3.1% net profit margin)
