Kenya Airways has announced what market watchers described as its worst results in memorable history as the airline continues to take stock of the full impact of the Covid-19 pandemic on its operations and businesses. This has triggered new talks of nationalization as the management rues the historic loss of over $330 million for the fiscal year of 2020 due to passenger numbers dropping by close to two-thirds, and the share loss jumped by as much. Meanwhile, a secret $91 million government bailout is waiting in the wings.
Apart from the rare exception, air operator financial results coming in for the full fiscal year of 2020 are severely in the red. Many account for historical losses. Forty-four-year-old Kenya Airways announced today that its pretax losses for 2020 amounted to 36.57 billion shillings ($333.2 million) – close to triple the sum from the previous year.
According to The Star Kenya, the airline’s Chief Executive Officer Allan Kilavuka said that passenger numbers dropped from 5.2 million in 2019 to 1.8 million during the year currently under review. Kenya Airways’ Chairman, Michael Joseph, was quoted as saying that things are bound to remain dire for the near future. “The COVID-19 global outbreak in 2020 was beyond anyone’s prediction, and its impact on the industry is expected to continue affecting air travel demand for the next two to three years,” Mr Joseph said.
Kenya Airways’ passenger numbers dropped from 5.2 to 1.8 million year-on-year. In December, KQ and Air France-KLM announced that they would be terminating their joint venture. Already suspended due to the ongoing crisis, the agreement will now officially end on September 1st this year. The Group still owns 7.8% of Kenya Airways. The remainder of the airline is divided, with 48.9% belonging to the Kenyan government, 38.1% to the KQ Lenders Company, and the rest to private shareholders.
Several voices have long called for the airline’s privatization, which the country’s Treasurer has also said it would favor as a long-term plan. However, in February, it was revealed that Kenya’s Treasury had approved a further Sh10 billion (approx. $91 million) in what Business Daily referred to as a ‘secret bailout’. The airline first sought state-aid (as a result of the COVID-19 crisis) in March last year, having halted all flights on March 22nd after orders from the government.
Even before COVID, the airline was struggling severely. With a loss of $258 million in 2106, the carrier came to the brink of bankruptcy due to a tremendous amount of debt, and lessors were threatening to repossess their aircraft. According to data from Planespotters.net, KQ only owns a few of its 39 aircraft outright – four Boeing 737s and seven of its nine 787 Dreamliners.
The SkyTeam alliance member also saw cargo volumes drop due to canceled flights leading to reduced belly space. Hoping to profit more from the airfreight demand growing due to such conditions, the airline, a little late on the ball compared to other ‘preighter’ operators, has converted one of its Boeing 787 Dreamliners to a temporary cargo-carrier.