Kenya Airways’ bottom line is looking up

Latest indications coming from Embakasi, Kenya Airways’ corporate headquarters, are such that for all intents and purposes, the financial corner has now been turned. This follows several cash-generating asset sales and leasing out of aircraft. Among them are the sale of a slot at Heathrow Airport in London, the sale of land near the airport, and the sale of for now two Boeing B777-200. Added income is generated by the leasing out of three Boeing B777-300 to Turkish Airlines and of two Boeing B787-8’s to Oman Air.

Two more Boeing B777-200s are still due for sale, and negotiations are said to be ongoing, which, when successful, will further improve the airline’s bottom line during the current financial year.

The main cash-flow improvements in recent weeks, therefore, have come from asset sales and lease income, which will last for between three and five years, while the jets are flying for other airlines.

Additional cost-saving measures, like staff rationalization and a review of the cost of outsourced services, are also expected to yield results, even though the pilots union, KALPA, continues to threaten the airline with industrial action, completely ignoring economic reality.

The main shareholders though – the Kenyan government with just under 30 percent and KLM with 20 plus percent – appear to be sleeping easier again these days following the tough decisions the airline’s new CEO and new board chairman took as early indications which are now emerging that the losses of the 2014/15 financial year may be halved when the results for the 2015/16 financial year are announced in the coming weeks.

Said a regular source close to the airline: “It is clear now that Plan Mawingo was aimed to put Kenya Airways at level par or ahead of Ethiopian. It is also clear that various outside factors like anti-travel advisories, security issues, the Ebola scare of last year, and a weakening of some of the airline’s core market economies made that plan falter and fail. The new management had to climb down from a high horse, but they did that with some dignity, considering the level of public criticism and with some determination. They ought to be given credit for that. Many of top management associated with the massive losses have gone, and a new team has been assembled. There is a lot of talent in [Kenya Airways], and they know that their hard decisions are now beginning to pay off financially. In two years’ time, the airline can be back in the black as long as the elections next year and other external factors do not spoil the recovery.”

In a related development, Jambojet, a subsidiary of Kenya Airways, also once again is expected to post a profit, which needless to say will help further improve the bottom line of Kenya’s national airline.