“This is bullshit!” retorted Kenya Airways shareholder Chris Kirubi yesterday after the airline announced the biggest loss ever by a locally listed firm.
At an investor briefing held in Nairobi, KQ reported a net loss of Sh25.74 billion for the full financial year ended March 2015, extending the Sh3.38 billion loss the airline made in previous year 2013/2014. Loss before tax stood at Sh29.7 billion.
KQ has attributed the huge loss largely to a Sh13 billion one-off cost incurred on fuel hedge deals, impairment costs on four Boeing 777-200 that are on sale and the “accelerated depreciation” of its old Boeing 767 planes.
“Kenya Airways should be taken off the market and left for a few private investors…we need to buy out KLM, get them out and try to have an East African Common Market strategy,” Kirubi said at the charged meeting.
KLM holds 26.7 per cent shares in KQ and the government is the majority shareholder, with 29.7 per cent, while the rest is owned by a mix of institutional, foreign and minority shareholders.
In a bid to calm down investors, chairman Evanson Mwaniki said: “I know how painful it is for investors to lose money when their shares get diluted.”
Mwaniki said the airline has a wider mandate – its contribution to the economy as a whole rather than just its own bottom line.
Kirubi, who said he will keep his shares with the firm despite the financial woes, warned that losses could double next year if bold steps are not taken to turnaround the airline.
“This business is totally under-capitalised. You cannot run a business of this size on loans,” he said, adding that KQ needs investors with a long-term outlook.
KQ’s short and long-term loans for last year totalled Sh130 billion, up from Sh80 billion the previous year. The airline said it had to take some short-term loans to boost its working capital.
It has signed up for another bridging loan with the African Export-Import Bank of $200 million (Sh20.4 billion) to help it service its other debts as it works on a turnaround strategy to boost revenue, group Finance director Alex Mbugua said yesterday.
KQ has appointed the Afreximbank as its financial adviser to help it raise long-term capital and review its debt portfolio.
CEO Mbuvi Ngunze acknowledged that the results were “tough to swallow”, but assured investors that the company has embarked on plans to boost revenue, including cost-cutting measures and a review of all its supply contracts.
Despite the loss, KQ reported a higher turnover, Sh110.1 billion, than the previous year’s Sh106 billion.