June 10, 2008 / 11:54 AM / 11 years ago

Kenya Airways says fuel costs threaten profits

NAIROBI, June 10 (Reuters) - The chief executive of Kenya Airways (KQNA.NR), one of Africa’s most successful airlines, said on Tuesday its profits could entirely disappear if fuel costs keep rising.

Like other world airlines, the carrier is facing higher operating costs as the price of crude oil has surged. It was up another 80 cents at $135.21 a barrel on Tuesday.

“We are still profitable at the moment, but if the price of oil keeps going up, it is going to eat into our profits completely,” Titus Naikuni told a press conference.

The airline, which is 26 percent owned by Air France-KLM (AIRF.PA) reported a 2.5 percent fall in post-tax profits to 3.9 billion shillings ($62.9 million) for the 2007/08 financial year.

It attributed the dip to Kenya’s political unrest in the beginning of the 2008, which led to cancellations in the middle of tourism’s high season.

Naikuni said fuel accounted for 39 percent of total costs up from 28 percent a year ago. The firm has taken measures to deal with the rising costs including passing them onto passengers, he said.

Kenya Airways has already raised its fuel surcharge and Naikuni said fare increments would be implemented from July.

“We believe we can go through the whole storm, but it depends on how the market reacts,” Naikuni said, adding that passenger numbers could drop as ticket prices went up. (Reporting by Duncan Miriri, editing by Will Waterman)

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