– KQ says its earnings have been hit by increased competition that affected pricing
– With a 25% drop, the Kenya Airways is expected to rake in about 85.84 billion
National carrier Kenya Airways (KQ) has said it expects a 25% drop in its earnings for the year that is set to end on Tuesday, December 31, 2019.
In a notice to shareholders and the public, KQ said its financial forecast had foreseen dwindled earnings occasioned by increased competition which dealt a blow on pricing.
Kenya Airways also attributed the forecasted trend on the recently introduced International Financial Reporting Standards (IFRS) 16 rule. The IFRS requires financial statements to reflect both assets and liabilities.
“The board brings to the attention of the public that the earnings of the current financial year are expected to be below by at least 25% than the earnings reported for the same period in 2018.
This announcement is based on the forecasted financial results of the group for the year ending Tuesday, December 31, 2019,” the statement read.
In 2018, KQ registered KSh 114.45 billion in revenue but loss stood at KSh 7.59 billion from KSh 6.4 billion realised during the same time under review in 2017.
The airline attributed loss on a sharp increase in fuel prices.
With at least 25% drop in earnings this year, the airline is expected to rake in about KSh 85.84 billion.
“Although Kenya Airways 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.
The board and management are undertaking several key strategic initiatives to improve the financial results of the company going forward both in 2019 and in the years ahead,” read the statement signed by Board Chairman Michael Joseph.
The profit warning comes two days after the airline picked Allan Kilavuka as acting CEO as Sebastian Mikosz plans to exit at the end of December 2019.
Kilavuka will be at the helm of the company until the board settles on a permanent Chief Executive Officer.
Plans are also afoot by the government to buyout the airline from its stakeholders that include, KLM-France Air, local banks and KQ staff.
Nationalising of the airline has been touted as a timely move that is set cushion Kenya Airways from consistent loss making.
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