National carrier Kenya Airways has recorded a pre-tax loss of Sh29.7 billion for the 2014-2015 financial year against Sh4.8 billion during the 2013-2014 financial year.
While reporting the findings Thursday morning, KQâ€™s CEO Mbuvi Ngunze attributed the loss to increased overhead costs which he said stand at Sh25 billion.
Ngunze added that the fuel costs have also contributed to the loss.
“We have had turbulent times and this loss is obviously significant. It is, however, important to know that we have made a significant investments at a time when the industry generally was going through hard times,” Ngunze said.
Ngunze also said the decline in tourist numbers coupled with an ambitious fleet expansion, have eaten into the firmâ€™s revenue.
The low tourist flights were attributed to the threat of insecurity posed by al Shabaab from the neighbouring Somalia.
“We had growth of the fleet which was not matched by revenue growth,” Finance Director Alex Mbugua said, referring to the purchase of Boeing 787 Dreamliner planes, which started in 2013.
Alongside a slowdown in tourism, Mbugua said the airline was hurt by competition from Gulf carriers.
Ngunze announced that the carrier will be selling off some of its aircrafts to stabilise its financial docket.
In addition Ngunze announced a Sh20.4 billion loan that KQ has secured from AfrEximbank to avoid complete bankruptcy. AfrEximbank based in Cairo will further advise KQ on capital raising along with the loan.
The firm booked an unrealised loss of 5.78 billion shillings from its fuel hedging after the slide in the price of crude.
Kenya Airways uses hedging as a risk management tool, entering agreements with counterparties, who pay them when the price of oil rises beyond a certain point, and vice versa.