Kenya Airlines (KQ) first recorded profits in 2024 in a development that highlights improvements in the airline's operational performance and partially highlights exposure to movements into the foreign exchange market.
Speaking about the announcement of last year's results earlier this week, Kenya Airlines CEO Alan Kirabuka said, “The ratio of revenue before interest tax, depreciation and amortization was 20% in 2024, higher than the industry's average 17%, indicating strong annual performance.”
“This is the highest profit this company has reported in its history.”
Kenya Airways has been caught up in severe financial difficulties for many years, especially since 2017, when it was liable to over $800 million to buy seven new planes and new engines.
The following year, the company became insolvent. The collapse of international travel during the pandemic, weakening of Kenyan Shilling during that period, and the global environment with higher interest rates allowed the company's debt to be managed more cleverly.
The airline also faced additional challenges, including increasingly strong performance from competitors such as Ethiopian Airlines, Emirates and Turkish Airlines on the continent. Furthermore, the escalation of operational costs meant that the Kenyan government-owned airline had caused losses to all passengers flying all passengers.
Sindy Foster, principal managing partner at aviation consultancy Avaero Capital Partners, told African Business that Kenya Airways' 2024 profits were the result of the Kifaru Turnaround Program, a project focused on customer experience, operational excellence and cost containment.
Due to improved financial position, KQ resumed trading on the Nairobi Stock Exchange in January, lasting for about four and a half years.
“Extremely sensitive to currency movements”
Improved financial performance was also driven by the stronger Kenyan Shilling (KES). Kenya's currency has been highly rated over 25% against the US dollar since its launch in 2024. This is because of the move by the central bank to strengthen its foreign exchange reserves and stabilize the shilling.
This is reflected in KQ results, indicating that these foreign exchange movements added KES 1.2 billion to the balance sheet in 2024 ($9.3 million). In contrast, in 2023, Shilling's accusations totaled 19.1 billion KES ($148 million), further pushing Kenya Airlines into the red.
“While KQ's operational turnaround provided the basis for the results of improvements proven by record revenue, a return to operating profit and concrete improvements, the forex profit ultimately led KQ to profitability, reversing the enormous exchange losses that had plagued the previous year.”
“But this highlights a warning point: Kenya Airlines' financial health remains extremely sensitive to currency movements. 2024 profits are an astonishing milestone, but some are the product of favorable forex terms that may not last,” adds Foster.
“To ensure sustainable profitability, KQ must continue to strengthen its core business and address foreign exchange exposure urgently. Reducing foreign debt, strengthening USD revenue, and maintaining currency and risk hedging are essential.”
