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Kenya: Kenya Airways unveils new plan to curb loss-making series

Kenya Airways has embarked on a new strategy to push back its loan repayments and renegotiate pending bank loans as it tries to restructure its operations.
The airline’s Chief Executive Officer Mbuvi Ngunze said in Nairobi Thursday the new corporate strategy was backed by its two key shareholders, Royal Dutch Airlines (KLM) and the Kenyan government.

 

“Our performance deteriorated because of the US$200 million financing gap. Our passenger-load-factor—measured by the number of seats occupied on every flight—was improved but the revenue targets have not improved. We recognize the business needed restructuring,” Ngunze said.
Kenya Airways released the company’s third quarter financial results showing loss after tax of Kenyan shillings 11.9 billion.  “We have reduced our overheads,” Ngunze said.
The Kenyan airline made the biggest gains on fuel cost savings, which saw it reduce its cost of operations by K shillings 8 billion.                
The new business strategy announced by the Kenyan airline will include an examination of the banks air ticket pricing formula. The idea is to keep the airline ticket prices at par with regional operators.
“We have also undertaken air ticket price restructuring with a focus on productivity,” Ngunze said.                         
Kenya Airways said it was forming a Special Purpose Vehicle, a special company, to be used to hold assets and finance the purchase of aircraft, which will help the corporation to meet its finance needs without putting the corporation at financial risks in the future.
“We have a plan approved by the board to close the financing gap. Our re-financing activity will also help us to manage our future finance needs,” Ngunze said.
The airline’s cost of fleet ownership stood at US$28 million dollars. However, the airline’s revenue remained flat for the past nine months.
The cost of finance for the airline was much higher, almost double at US$33 million, which rose from just US$16 million.
When the airline announced unaudited results for the third quarter of 2015, ending September, it showed a massive reduction in the cost of operations from US$412 million in 2014 to US$340 million.

 

The airline, which has been recording reduced profits and high costs of operations for the last four years, remains optimistic of a quick recovery.

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