Kenya Airways aims for profitability in the next two years

Kenya Airways passenger plane at JKIA. [Wilberforce Okwiri, Standard]

Flag carrier Kenya Airways expects to return to profit in 2024.

The airline, which has posted losses for 10 consecutive years, told shareholders yesterday that its turnaround plans are bearing fruit and are poised to further cut costs as well as boost revenue, which will allow it to put an end to a dividend drought in about two years.

Chief executive Allan Kilavuka said he plans to cut losses this year as the aviation industry recovers from Covid-19, as well as through cost-cutting initiatives including renegotiating lease terms of planes.

“We anticipate that we will be able to break even by 2024 with all the work going on (which) involves addressing legacy issues primarily around cost, which is structural and complicated to manage, but we hope that by 2024 we will have broken even,” he said at the company’s annual general meeting.

“From here we have a good base for growth.”

Mr Kilavuka said the airline had made progress in discussions with most of its aircraft lessors and expected to wrap up negotiations by the end of this month.

The new terms with leasing companies are expected to save KQ on aircraft ownership costs, with expectations being a shift from fixed payment for aircraft use to pay-as-you-go.

“We are also working on reducing other costs such as distribution and ground handling costs by addressing inefficiencies in these areas,” he said, adding that the carrier is unlikely to reduce its employees as it is currently not inflated.

“We also looked at the productivity of our employees in terms of how we can be more productive. It is unlikely that this will lead to a reduction in staff.

“We did a voluntary departure exercise in 2020 and did not renew some of the contract staff contracts and so as things stand we don’t have overstaffing.”

The carrier is also optimizing its fleet and route network, which could reduce the routes it serves as well as the number of aircraft it operates.

The CEO said bookings for 2022 remained on the rise, bucking the trend of election years when tourism and travel see significant declines.

KQ chairman Michael Joseph said the airline hoped to stop relying on government bailouts.

He told shareholders that KQ had made a commitment to the national treasury to be financially sound in the next two years and no longer dependent on the government.

“We also recognize that due to legacy issues, we have been a drain on the treasury. We plan to emerge from this situation and become profitable and self-financing … we believe that we will no longer be dependent on the Treasury and therefore on the taxpayers to continue, ”he said.

Last year, the airline received a total of 14 billion shillings from the government to help it weather the harsh impact of Covid-19 and over the years that amounts to tens of billions of shillings.

The carrier is still pursuing a partnership with South African Airways to co-found the Pan African Airline Group.

Mr Joseph’s chairman said that once this is launched, the two carriers will use a third airline, preferably West African.

“What we want to do is create a real African airline to provide connectivity within the continent. We will save money and become competitive that way,” he said.

“Before we get to that, we need to get better and overcome all the challenges we can foresee.”

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