Companies
Jambojet leans on KQ cash amid losses
Thursday July 13 2023
A Jambojet plane at the Kisumu International Airport. FILE PHOTO | TONNY OMONDI | NMG
Budget carrier Jambojet received additional financial support worth Sh1.45 billion in the year ending December 2022 from its parent company Kenya Airways (KQ) amid losses in the period.
Disclosures in the national carrier’s latest annual report show that the amount due from Jambojet grew to Sh2.56 billion by the end of last year from Sh1.41 billion in 2021, while the parent firm owed the subsidiary Sh92 million at the end of the period.
Read: Jambojet slows down on routes growth plan
The related party debt included loans that KQ gave the subsidiary during the year, but the share of the loans as part of the total amount due was not broken down in the report.
“The amounts due from Jambojet to Kenya Airways, relate to management fees, loans and interline balances from passenger uplifts on behalf of Jambojet. The related party balances are interest-free and have no fixed repayment terms while the loans are at a fixed interest rate of 9.5 per annum,” said KQ in the report.
The national carrier also disclosed that Jambojet’s estimated or assessed tax losses amounted to Sh3.27 billion last year, up from Sh2.93 billion in 2021.
KQ launched Jambojet in April 2014, making a return to the regional low-cost carrier market, a decade after folding its former low-priced unit Flamingo Airlines in 2004.
Flamingo had been making losses over the four years of its existence.
Having first flown on local routes only, Jambojet in 2017 acquired a licence to ply international routes, allowing it to start operating regional flights to Entebbe and Kigali, and later to Goma in the Democratic Republic of Congo.
It stopped flying to Entebbe and Kigali at the height of Covid-19 in 2021.
When it was set up, Jambojet leaned on KQ for non-core functions such as maintenance, ground handling, human resources and sales offices, as well as hiring pilots.
KQ and its subsidiary have, however, been affected by the tough operating environment for airlines, booking higher losses in the past year.
The national carrier’s net loss more than doubled to a record Sh38.26 billion in 2022 from Sh15.87 billion in 2021, largely on the back of a rise in financing costs.
KQ, however, saw a rise in total income from Sh70.22 billion to Sh116.87 billion but suffered a net loss increase largely due to a Sh18 billion finance cost that was passed through the income statement after the State took over the servicing of one of the airline’s dollar-denominated loans.
Read: Jambojet increases Goma flights to meet rising demand
Fuel costs rose by 160 percent on increased prices and more consumption due to a rise in flight operations to take up 53 percent of the direct operating costs.
