Stronger shilling aids Kenya Airways recovery

Kenya Airways (KQ) posted a profit in 2024 for the first time in over a decade, in a development that partly underscores the airline’s improved operational performance, but also its exposure to movements on foreign exchange markets.

Speaking about last year’s results announcement earlier this week, Kenya Airways’ CEO Allan Kilavuka explained “our ratio earnings before interest tax, depreciation, and amortisation was 20% in 2024, which is higher than the industry’s average of 17% and demonstrates the strong performance during the year.”

“This is the highest profit that this company has reported in its history.”

Kenya Airways has been embroiled in serious financial difficulties for many years, particularly since 2017 when it took on over $800m in debt to purchase seven new planes and a new engine.

The following year, the company became insolvent as a result of this debt. The collapse in international travel during the pandemic, the weakening of the Kenyan Shilling during that period, and a global environment of higher interest rates made the company’s debt pile even trickier to manage.

The airline also faced additional challenges, including the increasingly strong performance of competitors such as Ethiopian Airlines, Emirates, and Turkish Airlines on the continent. Furthermore, escalating operational costs meant the airline, which is part owned by the Kenyan government, made a loss on every passenger flown.

Sindy Foster, principal managing partner at aviation consultancy firm Avaero Capital Partners, tells African Business that Kenya Airways’ 2024 profits are partly “the result of its Project Kifaru turnaround programme, which focused on customer experience, operational excellence, and cost containment. Project Kifaru has been instrumental in restoring KQ’s operational viability and financial performance.”

The improving financial position led KQ to resume trading on the Nairobi Securities Exchange in January, following annual suspensions lasting about four-and-a-half-years.

Shilling strengthens against dollar

The improved financial performance was also driven by a stronger Kenyan shilling (KES). Kenya’s currency has appreciated by more than 25% against the US dollar since the start of 2024, partly because of the central bank’s moves to bolster its foreign exchange reserves and stabilise the shilling,

This is reflected in KQ’s results, which show these forex movements added 1.2bn KES to the balance sheet in 2024 ($9.3m). By contrast, in 2023, the shilling’s deprecation had a net negative impact totalling 19.1bn KES ($148m) and further pushed Kenya Airways into the red.

Foster explains that “while KQ’s operational turnaround provided the foundation for improved results – evidenced by record revenues, a return to operating profit, and tangible service improvements – the forex gains ultimately tipped KQ into profitability, reversing the huge exchange losses that had plagued prior years.”

“However, this underscores a cautionary point: Kenya Airways’ financial health is still highly sensitive to currency movements. The 2024 profit, while a remarkable milestone, is partly the product of favourable forex conditions that may not persist,” Foster adds.

“To secure sustainable profitability, KQ must continue strengthening its core business and urgently address its forex exposure. Reducing foreign debt, enhancing USD revenue, and maintaining its currency and risk hedges will be vital.”