The future of Kenya Airways remains uncertain after it was revealed the national aviation bill which is meant to drive the airline back to nationalization is facing delays.
During a press briefing after the company’s 45th Annual General Meeting, board chairman Micheal Joseph revealed the airline is looking to partnerships and consolidation in order to survive the effects of the pandemic on its business and that a positive trajectory for the airline is only expected to start around 2024 at the earliest
“If you look at all the projections, 2024 is probably the earliest we can see an upturn and a return to some normalcy in the aviation business. It will take a long time to get people to start flying, all the restrictions have to be lifted,” he said.
“Next year we have elections in Kenya and there is always a downturn in terms of revenue for us… so 2024-25 is the earliest we will start to see some growth”
The carrier is also looking to government for support in debt restructuring especially as the airline is scheduled to resume repayments of its sovereign-backed debt next month. A moratorium was negotiated with lenders at the start of the pandemic in order to relieve the national carrier during the crisis but USD $750 Million owed will now need to be channelled through state aid for the airline to survive.
Chief Executive Officer Allan Kilavuka said “The bigger discussion is how do you actually restructure that debt,” “For us to do that we need government support, because as you know they have guaranteed quite a lot of our debt. There is a discussion around that.”
Meanwhile Kenya Airways has also reported its fourth-quarter and full year 2020 financial results. The airline ended the year with a net loss of Ksh.36.2 million as compared to the previous year’s net loss of 12.9 million. The airline reported it carried 1.8 million passengers as compared to 5.1 million passengers carried in 2019 while uplifting 49.4 tonnes of cargo in comparison to 68.2 tonnes uplifted in 2019.
Financial Highlights:
| Fourth-quarter 2020 | Fourth-quarter 2019 | |
| Passenger Operating revenues | Ksh. 3,458 million | Ksh. 12,881 million |
| Pre-tax income (loss) | Ksh. 36,573 million | Ksh. 12,975 million |
| Net Income (loss) | Ksh. 36,219 million | Ksh. 12,985 million |
| Diluted Earnings (loss) per share | Ksh (6.22) | Ksh (2.23) |
“2020 was an exceptionally challenging year, characterised by disruptions occasioned by the COVID 19 pandemic. In the aviation sector, this was certainly the worst year in history, setting us back at least 15 years of growth. The impact on operations was unprecedented and disrupted the way we live, work, and do business.”
“It would appear like the most destabilising thing about this pandemic is that every time we seemed to have handled it, it threw us in a different spin. The grounding of aircraft and travel restrictions provided an opportunity to find innovative ways to reduce the impact. We operated 31 special repatriation flights that carried over 5,000 passengers, reconnecting them with their loved ones; expanded our cargo operations in Africa and embarked on a first-ever Boeing 787 Dreamliner repurposing project,” said managing director and CEO Allan Kilavuka.
“We were especially pleased to be awarded Africa’s Leading Airline in Best Business Class, Best Economy Class, and Best Brand in the 2020 World Travel Awards. We are extremely grateful to our customers for this recognition during the challenging year. This recognition is testament to the resilience of our staff across our customer touch points for staying true to our values,” noted Kilavuka.
COVID-19
The airline has implemented measures for the safety of its guests and team members to mitigate the impact of the COVID-19 on its financial position and operations.
Nevertheless, the COVID 19 Pandemic increased demand for air cargo and transport of essential medical and food supplies across the globe. Kenya Airways quickly adapted and implemented initiatives to take advantage of the demand. These included expanding operations in Southern Africa to fly Cargo from South Africa directly to Mozambique, Zimbabwe , Zambia, Malawi and Tanzania and introducing operations to Sharjah in the United Arab Emirates while it also invested in an ultra-modern pharma facility.
Costs and Productivity
Owing to reduced operations in the year, the Group’s total operating costs declined by 38.5%. Of the total operating costs, direct operating costs declined by 61.8%. Total costs reduced by 36.7%. Based on the above revenue and cost dynamics, the Group recorded an Operating Loss Margin of 51.3%, 50 percentage points below last year.
Going forward, the airline will be focusing on keeping its costs low and doing everything to ensure it achieves as much efficiency and productivity as possible. With that, the airline is rationalising costs to make sure it only keeps those that generate more revenue while driving superior customer experience.
Training and Capacity Development
Through 2020, KQ offered quality training to its staff and external parties at the Pride Centre. To mitigate the COVID 19 disruptions, the centre successfully transitioned to virtual classes during COVID-19 for the Pride Stars program. The carrier also received recognition from IATA as a training centre of excellence and a Regional Top Performer Approved Training Centre.
Fleet Development
The fleet size in service did not grow in 2020. The significant reduction in network requirements led to limited aircraft utilisation. KQ also terminated the lease of two Boeing 737-700 aircraft deemed surplus to its network while embarking on fleet cost restructuring, which is anticipated to save the Airline up to Kshs 4.8 Billion in 2021. The Company ended the year with 42 aircraft in its fleet.
Human Resource
The effect of the COVID-19 pandemic on the airline industry necessitated the implementation of significant and difficult measures to mitigate its impact. Measures taken included: recruitment freezes, reduced pay for all employees, and staff rationalisation actions.
By December 2020, Kenya Airways had a total headcount of 3,652 staff, a net reduction of 1,123 staff compared to the prior year, equivalent to a 24% decline from December 2019, and this was primarily due to phased staff rationalisation actions in 2020.
To better support employees as they navigate these difficult challenges, the airline ramped up its employee wellness and psychosocial support and engaged financial institutions and insurance companies to provide payment moratoriums.
Forward Looking Guidance
The carrier anticipates a measured but steady return to travel with the rollout of COVID-19 vaccines and country-specific containment measures. The future growth will depend not only on how to stabilise the organisation now but more importantly how the airline responds to the needs and desires of its esteemed customers. The airline has made customers the central piece of its recovery and sustainability.
Diversification will remain key to KQ’s recovery and it will continue to innovate across its business. The airline is doing everything possible to emerge a more financial stable and competitive airline. Although the future remains uncertain, the carrier’s main aim is to rebuild the airline into a strong and sustainable organisation.
