I'm a fan of KQ, passionately known as the Pride of Africa, it was one the first stock i bought when i first started trading on this Eastern shores of Africa, i bought the stock in December 09, six month prior KQ had announced mega losses due to losses on their fuel hedges, the stock plummeted to record lows immediately after those results. In 2010 the stock rebounded to post a year high of Ksh 66 but fast track to end of March 2011 the stock is posting one year lows, such is volatility of the stock my friends.
So i seat here in this chair of mine waiting for my class which starts in around an hours time, What has changed? The company is on a growth trajectory, its half year 2010/2011 earnings and earnings per share (EPS) where 66% ahead of the previous year, so i decided to blog on it, and i think the High oil prices, the political turmoil in North Africa and the Middle East and the pending capital call are the main catalysts for the companies share price downward spiral.
High Oil Prices
Fuel: IATA raised its 2011 average oil price assumption to $96 per barrel of Brent crude (up from $84 in December), in line with market forecasts. Including the impact of fuel hedging, which is roughly 50% of expected consumption, this will increase the industry fuel bill by $10 billion to a total of $166 billion. Compared to levels in 2010, oil prices are now expected to be 20% higher in 2011. Fuel is now estimated to represent 29% of total operating costs (up from 26% in 2010). In fact oil is now hovering around $114 per barrel.
North Africa and Middle East Turmoil
KQ flies to Cairo and was recently exposed to this crisis during the recent revolution there and the crisis has already started affecting passenger numbers for African carriers don't forget the crisis in Ivory Coast, KQ flies there too. Look at the latest passenger Statistics from IATA below
Africa saw traffic fall by 1.3% compared to February 2010. Against a capacity expansion of 6.9%, load factors fell to 60.4%. Egypt and Tunisia account for 18% of the African market and 0.6% of worldwide capacity. Libya is a further 3% of the African market and 0.1% of global capacity. The impact of political unrest has been severe with absolute traffic (measured by RPKs) falling by 13.1% compared to January levels.
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