November 13, 2013 / 12:25 PM / 4 years ago

UPDATE 2-Kenya Airways sees new planes, expansion boosting 2014 profits

* Swings to H1 profit from year-ago massive loss

* Expects delivery of 4 Dreamliner planes in 2014

* Extends CEO’s contract by a year to end-2014 (Recasts with outlook)

By Duncan Miriri

NAIROBI, Nov 13 (Reuters) - Kenya Airways expects to post higher profits next year, thanks to the planned delivery of fuel-efficient planes and the expansion of its Nairobi hub, it said on Wednesday.

The carrier, which is 26.73 percent owned by Air France-KLM and 29.8 percent by the government, is ranked among the largest carriers in sub-Saharan Africa.

It swung into a pretax profit of 548 million shillings ($6.39 million) in its first half ended September, from a loss of 6.589 billion shillings in the same period last year.

“Next time we are standing here we will post excellent results,” Chief Executive Titus Naikuni told an investor briefing.

The airline, which took delivery of its first Boeing 777-300ER this month, expects two more of the same planes in 2014. It also expects Seattle-based Boeing to deliver its first four Boeing 787 Dreamliner planes starting in March.

The new Dreamliners will replace Kenya Airways’ ageing fleet of B-767s for long-haul routes, offering 20 percent more fuel efficiency.

“You will have more fuel efficiency and a better product so its a double-edged sword,” Finance Director Alex Mbugua told Reuters after the briefing.

Naikuni said another bottleneck they faced would be removed in March when the government completes building a fourth terminal at the Nairobi airport.

The carrier has been blaming lack of capacity at the airport for delays in expanding its operations.

Built in the 1970s to handle 2.5 million passengers a year, the airport has been struggling to cope with more than six million passengers every year, as its regional importance grew.

Shares surged as much as 9.3 percent after the results were unveiled to a near one and a half year high of 14.70 shillings per share before paring the gains to 13.80 shillings.

“We have turned the corner,” Naikuni said, adding that the peaceful passage of Kenya’s presidential election in March had also boosted the travel business.

Total revenue jumped 9 percent to 54.34 billion shillings, buoyed by a 7.1 percent jump in revenue from the passenger business. Cost per seat fell while the revenue per seat went up during the period, the airline said.

It also benefited from a realised gain of 216 million shillings from its fuel hedging positions.

Board Chairman Evanson Mwaniki said they had extended Naikuni’s contract by a year till the end of 2014, to ensure continuity during the critical expansion period.

The search for his successor had already started, Mwaniki added. ($1 = 85.7000 Kenyan shillings) (Editing by George Obulutsa, Ron Askew)

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