KQ net earnings to drop by 25 percent on forex exchange losses, loans servicing

National carrier Kenya Airways’ net earnings for the year ending December 31, 2022, are set to dip by 25 percent, the airline has said.

Kenya Airways Board of Directors, in a profit warning announcement to stakeholders, said that the dip has been occasioned by forex losses but exuded confidence that it is a one-off loss.

KQ board chairman Michael Joseph in a statement to stakeholders said that the announcement was based on a financial analysis of the loss-making airline.

“The Board wishes to bring to the attention of the public that the earnings for the current financial year are expected to be lower by at least 25 per cent,” he said.

With the projections for a profit pushed to the start of 2024, KQ, which the government said is developing a financial strategy to stop funding by the end of December this year, has blamed the losses on forex exchange fluctuations, servicing loans and high fuel prices.

“Although the company’s performance would reflect an improved revenue position in the year, the net earnings would be constrained by forex losses which have been occasioned by the novation of the guaranteed USD loans as part of the ongoing financial restructuring programme,” the chairman said.

The profit warning comes on the heels of a planned termination of financial injections by the State by the end of December 2023, according to a brief note in the draft 2023 Budget Policy Statement from the exchequer.

"To support the aviation industry, the government will develop a turnaround strategy for Kenya Airways. A critical plank of this strategy will be a financing plan that does not depend on operational support from the exchequer beyond December 2023," the statement reads in part.

Nevertheless, the straining and technically insolvent carrier will receive government support to a tune of Ksh.34.9 billion in the financial year ending June, after the government earlier pledged continued financial aid in the previous fiscal year.

For over seven months since June 2022, KQ has been undergoing restructuring - financed with State loans that will have to be repaid - focusing on fleet and network simplification, staff rationalisation, cost management, labour agreement overhauls, ancillary business and strategic partnerships.

In mid-December, Transport Cabinet Secretary Kipchumba Murkomen said the search for strategic partners for KQ topped the list of President William Ruto’s mission to Washington during the US-Africa summit.

Dr. Ruto is understood to have pitched a plan to Delta Air Lines of Atlanta during the visit. Notably, KQ borrowed Ksh.11.3 billion to keep afloat this year, in addition to another facility already running to the tune of Ksh.11 billion and Ksh.14 billion in 2020 and 2021 respectively.