“After having finally secured its place in providing non-stop flights between East Africa and the United States of America, the national carrier Kenya Airways has commenced talks on renewing its hedging strategy to counterbalance rising fuel prices,” says Bloomberg’s Kamlesh Bhuckory.
“We have been using the hedging products in the past. The products expired roughly three months ago. What we want, now we are in post-restructuring, is to start talking hedging again.” Kenya Airways CEO Sebastian Mikosz as quoted by Bloomberg.
Brent crude prices hit 70 dollars a barrel on signs of tightening crude stocks, but settled off that level on Thursday, fueled by an agreement by OPEC & other major exporters including Russia, to implement output cuts of up to 1.8 million barrels per day, which are likely to continue throughout 2018, in an effort to tackle global oversupply that affected the market in the last three years.
OPEC doesn’t want central banks around the world to start responding to inflationary pressure from oil prices above 70 dollars a barrel, nor do they want U.S. shale investments to rise, so the cartel will try to take oil prices down if Brent exceeds 70 dollars per barrel in the coming days, according to Goldman Sachs Inc an American Multinational Finance Company.
KQ wants to take up this opportunity before the prices go up seeking its return to profitability after years of loss and debt.
The airline has not confirmed on what percentage its wants to hedge where, as seen in the past having hedged 80 per cent for one year and 50 per cent for two years. In 2016 the airline made a loss of Kshs 26.2 billion stemming out largely from fuel hedging.
There are instances where the airline has fuel hedged before and if they get it right, it will be a massive gain for the company.
KENYA SET TO GAIN FROM DIRECT FLIGHTS TO THE USA
“This potential lucrative route is set to boost annual revenue by 10 per cent from 2019,” says Chief Executive Officer Sebastian Mikosz. The carrier, which is 7.8 percent owned by Air France, KLM, has started taking bookings for the flights to New York that will carry 234 passengers each way on a Boeing 787 Dreamliner plane.
The country which has in the past held international conferences and hosts 48 U.S. or U.S.-based, organizations, such as Google and IBM will encourage more hosting opportunities for the country and increasing its opportunities as an investment hub.
– By Nelly Kanyingi