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KQ in 2010-11 (Boom, Bust or Blah)
mwanahisa
#421 Posted : Sunday, October 31, 2010 9:39:05 AM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
I am actually revising my expectations downwards after seeing the operational statistics for the 2nd Qtr.

KQ generates roughly 50% of its operating profits from Africa yet PLF on intra-African routes have remained constant. So we can't expect much growth in profits on that front i.e. the Africa sector, barring changes in other variables.

In addition even though cargo contributes less than 10% of revenue, the contribution of freight, mail and others to operating profits has been just shy of 50% in recent years. The Operating stats show that during the first half of the year, this has only grown by 2.1%. So unless they have been able to grow the yields on cargo, I am also tempering my expectations on account of this.
VituVingiSana
#422 Posted : Sunday, October 31, 2010 10:48:30 AM
Rank: Chief

Joined: 1/3/2007
Posts: 18,361
Location: Nairobi
mwanahisa wrote:
In addition even though cargo contributes less than 10% of revenue, the contribution of freight, mail and others to operating profits has been just shy of 50% in recent years.
Where did you get this info? Please post this info...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
the deal
#423 Posted : Sunday, October 31, 2010 11:56:45 AM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
@Mwanahisa lemme take you to school...if an airline with 100 seats flies a distance of 1000 km the ASK are 10000 if 60 passengers,km travelled is 60000 therefore PLF is 0.6 so PLF has nothing to with revenue but utilisation of capacity.

RPK is calculated by multiplying the total no of revenue paying passengers aboard a plane by the distance travelled measured in Km...its actually the measure of sales volume of passenger traffic...
mwanahisa
#424 Posted : Sunday, October 31, 2010 12:24:14 PM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
the deal wrote:
@Mwanahisa lemme take you to school...if an airline with 100 seats flies a distance of 1000 km the ASK are 10000 if 60 passengers,km travelled is 60000 therefore PLF is 0.6 so PLF has nothing to with revenue but utilisation of capacity.


@the deal, I am not sure who of us needs to go to school. You are stating the obvious in terms of capacity utilisation.

I am actually not too concerned about the revenue and nowhere have I stated that in my post above.

My main issue is with regard to operating profits. If KQ flies planes carrying only 60.5% of the passenger capacity, that translates to lower operating profits, as opposed to, if it were, say 70%. The main way to offset this would be by charging higher fares per passenger/Kg ferried. Another might be if the USD has appreciated significantly against the Kshs hence fares increasing in Shilling terms.

Has KQ increased the average fares on African routes over the last 6 months relative to 2009-10? If so, then of course operating profits from that sector could be higher, than last year.

Note that in my post, I indicated that I was just lowering my expectations. I did not say that I expect lower profits. I know that they will be great relative to H1 2009-10, which were abysmal.
mwanahisa
#425 Posted : Sunday, October 31, 2010 12:27:15 PM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
VituVingiSana wrote:
mwanahisa wrote:
In addition even though cargo contributes less than 10% of revenue, the contribution of freight, mail and others to operating profits has been just shy of 50% in recent years.
Where did you get this info? Please post this info...


Note 3 (Segmental Information) to KQ's 2009-10 Annual Report and Accounts.
the deal
#426 Posted : Sunday, October 31, 2010 12:38:58 PM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
@Mwanahisa KQ earns in US$'s on all its routes excluding EAC...the Ksh has depreciated marginally against the US$ but the Forex gains are offset by US$ dominated loans...RPK's are a key here because their the sales and thats KQ's core business.
mwanahisa
#427 Posted : Sunday, October 31, 2010 1:08:50 PM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
RPKs are important but the corelation between RPKs and Operating Profits is not exactly linear. Higher RPKs with lower PLFs could still result in operating losses.

Generally the more passengers flown and the longer the distances they fly results in higher revenues and higher operating profits. That is, if operating costs are kept constant or rise lower than proportionate to the increase in revenue.

Kindly note my emphasis on operating profits which do not take into account Finance costs/income, gains/losses on fuel derivatives etc.

By the way, I am hoping that the average fares paid on the African routes actually went up in H1 2010-11 due to the World Cup as well as the ongoing recovery from the 2008-09 Global Financial Crisis.
the deal
#428 Posted : Sunday, October 31, 2010 1:32:30 PM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
Yes the fares to Joburg during the world cup where at a premium i mean double the normal prices...if it's operating profit that one will double...
mwanahisa
#429 Posted : Sunday, October 31, 2010 2:53:48 PM
Rank: Elder

Joined: 6/2/2008
Posts: 1,438
the deal wrote:
Yes the fares to Joburg during the world cup where at a premium i mean double the normal prices...if it's operating profit that one will double...


@the deal, I will actually be deeply dissapointed if H1 2010-11 operating profits ONLY double from those of last year's H1.

In an earlier post, I indicated that I expect them to rise more than 10 fold for the first half in comparison to last year. I gave my rationale in that post.
ndumesidubu
#430 Posted : Sunday, October 31, 2010 6:31:49 PM
Rank: New-farer

Joined: 10/31/2010
Posts: 11
Location: nairobi
I am a newbie in the forum but i hope my2 cents will count for somethin, with regard to revenue contribution we might want to also consider how much of kqs revenue comes from premium long haul traffic since there has generally been a revamp in this stream from the recovery out of the global recession, if the contribution is significantly large then an increase in op profits with no accompanying increase in pax numbers will be explained.In as far as the surge of revenues from the world cup is concerned i have my doubts if the market will reward kq in terms of value since this might be compensated by those rushing out of their positions as happens at such points in the cycle .....plz dont crucify me am a total newb.
"Individuals who cannot master their emotions are ill-suited to profit from the investment process."
Benjamin Graham
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