Airlines In Africa: Kenya Airways, SAA Bleed As Ethiopian Airlines Shine

Written by Staff

Aug 04, 2015

By Christine Mungai | From Mail & Guardian

Kenya Airways (KQ) last week announced a loss of $257 million (Ksh25.7 billion), the biggest ever in the country’s corporate history.

It’s a shocking tumble for Kenya’s national carrier; although this is the third year the company is running a loss, the magnitude of KQ’s hole – this year’s loss is 661% bigger than last year’s – was much deeper than anticipated.

It seemed like all factors in the world seemed to conspire perfectly to batter KQ’s fortunes – company CEO Mbuvi Ngunze blamed the losses on competition from Middle East airlines, western travel advisories against Kenya, runway closures, Ebola in West Africa, terrorism, high operating costs, and troubled relations with crew.

But there have also been credible reports of shady procurement and aircraft leasing scams within the company that have been haemorrhaging cash.

According to KQ’s consolidated income statement, although turnover increased by 4% in the past year, it just wasn’t enough to keep up with costs – operating losses were 500% higher than last year, net finance costs nearly three times higher, and ultimately, loss after tax was 661% higher than in the year before when the company posted a net loss of$33 million (Ksh3.3billion).

KQ is not alone

Still, KQ can find small comfort that another one of Africa’s big carriers has been in the red for years now, too – South African Airways (SAA) posted a net loss of $200 million (R2.5 billion) in the past financial year, up from $91 million (R1.1 billion) in 2013.

And in SAA’s case, the sustained currency decline of the rand against the US dollar has wiped out any advantage of lower oil prices in the global markets.

In the company’s most recent annual report, despite the 3% decrease in the average price of Brent crude oil in the financial year 2013-14, the total fuel costs actually increased 16% from the previous year as a result of the weaker rand.

Since 2011, the real rand cost of fuel to SAA has increased 77%, and the company also suffered a $15 million (R200million) loss from fuel hedging after oil prices went in the direction the company had not anticipated – down.

Meanwhile, another big flier in African skies, Ethiopian Airlines, is posting healthy profits in the region of $96 million and can now properly claim to be the king of East Africa’s skies, at least.