Editor's Review

National carrier, Kenya Airways may lose Ksh14 billion in revenue if it decides to refund passengers.

National carrier Kenya Airways may be required to pay Ksh13.9 billion in refunds for tickets bought last year and cancelled due to the Covid-19 pandemic.

This may force the airline to revise its revenue downwards for the year ended December 2020.

Kenya Airways has followed in the footsteps of other airlines globally, offering its customers vouchers that will enable them travel in future, without having to refund the cash.

KQ has been struggling over the past year, this has seen it convert some of its passenger airlines to cargo carriers. Therefore, the vouchers will allow cash-strapped KQ to remain afloat in the wake of the pandemic.

Ticket sales are considered as liability up until the customer travel or tickets expire then they become revenue.

"As disclosed in note 30, the group's and company's value of unused tickets in relation to passenger revenue at December 31, 2020, was Ksh13.9 billion and Ksh13.7 billion respectively."

Pricewater Coopers (PwC) ruled out expiry of the tickets as an option, noting that Covid-19 took a toll on the world.

"In the current year, management have expressed significant in relation to recognition of unused tickets on revenue in view of extensions in ticket expiries and refund options offered to passengers as a result of the Covid-19 disruption in the aviation sector," PwC stated.

The Ksh13.9 billion in ticket sales represents 26.3 per cent of the Ksh52.8 billion KQ posted as revenue during the review period.

Extension of validity of tickets means that KQ's revenue may drop if it opts to refund the customers who have not flown.

It also means that it will take longer to normalise revenue streams at the national carrier if it allows the passengers to fly at the time of their own choosing in future.

A lot of passengers had wanted to fly as scheduled, but the regulations imposed by national governments around the world to fight the Covid-19 pandemic led to massive ticket cancellations starting in 2020.