For the year ended 31st March 2010, Kenya Airways Ltd recorded Total revenue of Kshs 70,743,000,000.00, and the company’s
Operating Profit amounted to Kshs 1,839,000,000.00

Operating margin = (Operating Profit /Revenues) x 100.
= (1,839,000,000.00 / 70,743,000,000.00) x 100 = 2.6%

Out of every Kshs1.00 Kenya Airways collected as revenue in the year, it retained only Kshs 0.03, as operating profit after paying for the operational expenses incurred in getting that Kshs 1.00
It is out of that 3Cents that Kenya Airways is to pay out financial costs as well as taxes and the balance retained as profits for share holders.

Should we choose to focus only on the company’s core business operations, Kenya Airways operational performance for the just ended period is rather dismal compared to the previous periods
 For 2010, Kenya Airways had an operating margin of 2.6%
 For 2009, the operating margin was 5.6%
 For 2008, the operating margin was 11.6%
 For 2007, the operating margin was 13.1%
Declining operating margins over time should be a warning sign to any investor.

On average, out of every kshs1 in revenues that Kenya Airways collects annually, it has overtime paid more and more in operational costs. It could imply that the company is having difficulty in bringing in revenues considering that it registered slightly declined revenues compared to the previous year, or that the management is facing increasing challenges in improving the company’s Operational Efficiency.
The 54.5% decline in Operating Profits might explain why despite reporting 148% improvement in earnings, the share registered a 8% decline in trading price as soon as results were published.

A lot is learnt by observing Operating profits trend over time, but it should not be the only factor one considers when planning whether or not the Kenya Airways shares are a viable investment.

Ceteris paribus.

ProverB, very interesting math - miles ahead in ahead in fundamentals

statMeister=ProverB...tooting his own horn!

The poor margins at KQ are depressing... and the lower margins from year to year as well... BUT there are not apples to apples...

KQ has changed the way it accounted for hedges (according to some IAS rule)...

However you slice & dice it... KQ needs to put up some serious 1Q 2010-11 passenger numbers as well as awesome 1H 2010-11 financial figures!

When is the AGM?

Well said

The 2.2bn drop in operating profit is partly due to the implementation of the collective bargaining agreement which lead to increased staff costs by 2.1bn.

Cabin factor dropped to 67% from 71% as a result of more aircrafts being available.

As part of their fleet modernization plan, the new aircraft is suppossed to be more fuel efficient (it is worth noting that the bulk of the costs are fuel related). - too bad Boeing is taking too long to deliver.

phew!!! it seems theres a god after all today it seems to be holding its ground, lets wait 4 it

Please note..i have not said do NOT buy KQ..just pointed out their core business fortunes are fading.
The core business is what defines the investment prospect.. KQ's core business has not been good over time..their making money on fuel derivatives though profitable... is not part of their core business..they may as well just quit air travel and go full on commodity trading if this fuel thingy seems so awesome!!
sliding margins imply management is out of their depth..no matter how good plans are they do not seem to have capacity to stem dropping margins!
But for share traders..bulk of decision to buy on sell is founded on investor behavior and ignorance..thus why "6 months down the line they will be rushing in"
As solid investment option.. Kq has alot to explain

Nope to 20/-... coz at that price I will pull all stops out to buy!
KQ has 6 billion+ in cash (14/- in cash)... So the rest is worth only 6/-?

No more 20/-... already trading steady to up today with plenty of buyers ready at 50/-...