Kenya Air Says Tourism Slump May Have Bottomed Out

Kenya Airways sank deeper into the red in the year to March, but chief executive Mbuvi Ngunze said the tourism slump that sparked the losses may have bottomed out.

The carrier, one of Africa's largest, said its pretax loss widened to KED29.71 billion shillings (USD$293 million) for 2014/15, from KES4.86 billion shillings a year earlier, hurt by higher fleet and financing costs and an unrealised fuel hedging loss.

Fleet ownership costs doubled to KES25.93 billion shillings, mainly due to an impairment of KES5.58 billion from a write-down in the value of Boeing 777-200s on sale.

The firm booked an unrealised loss of KES5.78 billion shillings from its fuel hedging after the slide in the price of crude.

Passenger numbers rose 12.4 percent to 4.18 million, boosted by Jambojet, a low-cost carrier launched in April last year, but the impact was blunted by lower yields on passenger revenue.

The airline, part-owned by AirFrance-KLM, has faced rising debts due to new aircraft purchases and has been in the red for the past three years as Kenya's tourism industry was hammered by Islamist militant attacks in the country.

The carrier said its planes are often not full and increased competition from Gulf carriers forced it to discount some of its fares.

Ngunze said leisure travel might start to pick up as Britain and some other countries had lifted warnings against travel to the Kenyan coast where many resorts are located.

"The leisure travellers particularly from Europe, with the adjustments in travel advisories, you'll probably see them in the back end of the year and into next year," Ngunze said.

The airline has appointed Cairo-based African Export-Import Bank (Afreximbank) to arrange a USD$200 million bridging loan and advise it on long-term capital raising, he said.

"This financing is critical for us," Ngunze said.

The carrier is also selling seven older planes and some land and it expects to raise another USD$100 million from the sale.

Total debts stood at KES130 billion shillings at the end of March against a negative equity of KES6 billion shillings.

"We had growth of the fleet which was not matched by revenue growth," Finance Director Alex Mbugua said, referring to the purchase of Boeing 787s, starting in 2013.

Kenya Airways plans to launch direct flights to the United States after US President Barack Obama announced during his visit to Kenya at the weekend that the two countries were in talks on the issue. The talks are expected to conclude by September, Ngunze said.