Kenya Airways braces for more woes as income dips

Kenya Airways expects earnings for the current financial year to be lower by at least 25 per cent than those of the same period in 2018, pointing to wider losses during the period ended December 31, 2019 despite cost cutting measures by the airline.

The airline made the announcement in a notice signed by board chairman Michael Joseph.

The announcement is based on the forecast financial results of the group for the year ending December 31. 

The profit warning means that KQ, as the national carrier, is known internationally, will report a net loss greater than the Sh7.5 billion for the year ended December 31, 2018 when higher costs off set a jump in revenue. 

Troubled carrier

The troubled carrier blamed the expected dismal performance on increased competition in the airline area of operations and the adoption of new IFRS 16 rules in 2019.

Joseph said although the airline had realised improved revenue growth in the year, profitability was constrained by the increased competition in the airline area of operations, which, in turn, has increased pressure on pricing in order to remain competitive.

“In addition, the adoption of new IFRS 16 rules in 2019, has required significant adjustments to both the profit and loss statements and balance sheets for the current financial year,” he added.

Joseph, however, said the board and management were undertaking several key strategic initiatives to improve the financial results of the company both in 2019 and in the years ahead.

Listed companies usually announce profit warning to advise shareholders and the public that its earnings results will not meet expectations.

The warnings are usually issued two or more weeks to the public announcement of its official financial results to soften the blow to investors, allowing both them and the market time to adjust accordingly. This takes some of the sting out of the expected price adjustment.