Friday, June 5, 2009

Kenya Airways makes first loss in 13 years

2009-06-05

Kenya Airways reported on Friday its first full-year loss since its privatization in 1996, blaming new accounting requirements to write down losses on future fuel hedging contracts.

The Kenyan national carrier made a 5.6 billion shillings ($80.9 million) loss before taxes for the year ending March 31, compared to a profit before taxes of 6.5 billion shillings ($93.2 million) the previous year.

Kenya Airways Group Finance Director Alex Mbugua said new accounting rules required the airline write into its latest financial accounts any losses or gains on fuel hedging contracts, including those that will come into effect in the future.

Many airlines enter into contracts to buy fuel at a price negotiated in advance to guard against the fluctuations of the world markets.

In Kenya Airways' case, this was 56 percent of its needs for the financial year just concluded and 21 percent of its needs until December 2010. The airline lost a total of 8.9 billion shillings ($127 million) on its fuel hedging contracts, which pushed the company into the red from an operating profit of 4 billion shillings ($57.7 million). «The adjustments are purely accounting. They have no impact on cash-flow,» Mbugua told investors and journalists.

The airline recorded growth in its passenger numbers for Africa, which is its main market. It reported a robust growth of 15.7 percent in the passenger numbers to west and central Africa and 6.7 percent in southern Africa traffic.

Kenya Airways is one of Africa's most successful airlines following its privatization in 1996.

KLM Royal Dutch Airlines owns 26 percent of the company, the Kenyan government 23 percent and the rest of the shares are traded on the Nairobi and Uganda Stock Exchanges.