August 29, 2018 / 6:39 AM / 3 months ago

UPDATE 2-Kenya Airways expects better second half after H1 pretax losses narrow

(Adds details, outlook)

By George Obulutsa

NAIROBI, Aug 29 (Reuters) - Kenya Airways expects much better performance in the second half of this year, helped by an improved business environment, and after prolonged election uncertainty in Kenya in the second half of 2017 hit passenger numbers.

The airline, which is 7.8 percent owned by Air France KLM , reported a pretax loss of 3.99 billion shillings ($40 million) for the first half of 2018, from a loss of 5.77 billion shillings during the same period last year.

Kenya Airways this year changed its financial reporting period to match the calendar year. Previously its financial year was to the end of March. Comparisons given in its first-half results were with January-June 2017.

In the second half of 2017, Kenya Airways’ domestic and intra-Africa passenger traffic dropped because of jitters over Kenya’s presidential election in August. The election was subsequently nullified by the Supreme Court and a rerun held with President Uhuru Kenyatta elected for a second term.

“August is already behind us. I can confirm we are already much better than the previous August, in terms of traffic, in terms of domestic growth,” Chief Executive Sebastian Mikosz told a news conference on Wednesday.

Kenya Airways is showing signs of recovery after it came close to collapse last year, leading to a $2 billion financial restructuring in November that included a government bailout which shrank Air France KLM’s stake.

The carrier said its revenue rose 3 percent to 52.19 billion shillings, but total operating costs rose by 4 percent to 53.22 billion shillings due to rising global fuel prices.

The airline has said it would resume aviation fuel hedging in the second half of this year after price volatility drove up its costs.

Mikosz said two weeks ago the airline’s board approved the plan to hedge.

“Effects of the hedging policy will only be felt in 2019,”he said.

Passenger numbers increased 7 percent in the first half to 2.3 million, it said.

Kenya Airways, which plans its first non-stop flight to New York in October, said it was preparing to launch at least three new routes next year, with Europe, Middle East and Asia as a possibility, Mikosz said.

At 1131 GMT, Kenya Airways shares were trading up 2.36 percent at 10.85 shillings a share on the Nairobi Securites Exchange.

The airline still has a long way to go, but progress so far was encouraging, said Aly Khan Satchu, a Nairobi-based independent trader and analyst.

“It’s a big, big task. It’s like trying to navigate and turn an oil tanker. You are not going to get a quick result here. But from what I see, traffic numbers were up,” he said. ($1 = 100.7300 Kenyan shillings) (Reporting by George Obulutsa Editing by Omar Mohammed and Alexandra Hudson)

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