UPDATE 2-Kenya Airways losses deepen, expects more challenges ahead

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NAIROBI, Aug 28 (Reuters) - Kenya Airways expects its full-year 2020 revenues to drop by between 60 billion shillings ($555.30 million) and 70 billion shillings, higher than its previous estimate, its chief executive said on Friday.

First-half pre-tax losses were 14.36 billion shillings ($133 million) as COVID-19 suspended travel and slashed revenues, the airline said. This compares to an 8.56 billion-shilling loss in the same period last year.

The airline said there were more challenges ahead, as air travel demand for the rest of 2020 is expected to be less than half of 2019’s levels.

“In terms of projected revenue for up to the end of the year, we see that we will have a decline of about between 60 and 70 billion shillings, probably more, depending on how the uptake in demand is,” chief executive Allan Kilavuka told an online briefing.

In June, the airline projected an annual revenue loss of between $400 and $500 million.

Kenya Airways, in which Air France KLM holds a small stake, said first-half revenue plummeted 48% to 30.21 billion shillings.

Passenger numbers plunged 56% to 1.1 million. Passenger numbers were not expected to return to 2019 levels until 2024, said chairman Michael Joseph.

The airline said it was in talks with some of its aircraft lessors to return some planes early, or convert passenger planes to cargo planes.

“I am confident that these discussions will bear fruit in the next six weeks,” Kilavuka said.

Kenya Airways resumed domestic flights in mid-July after the government cleared local air travel, and international flights were restarted on Aug. 1.

The airline was struggling before the coronavirus outbreak, posting a 2019 loss of almost 13 billion shillings.

A law to pave way for the nationalisation of the airline, which had been proposed before the pandemic, is now being reviewed by parliament.

As a result, the Nairobi Securities Exchange in July suspended trading of airline shares for three months.

Chairman Michael Joseph expected the nationalisation process to be complete by early next year.

The airline has already laid off about 650 staff and proposed reducing its network and offloading assets.

The COVID-19 pandemic has grounded much of the global aviation industry, with African airlines expected to lose $6 billion in revenue this year.

$1 = 108.2000 Kenyan shillings Reporting by George Obulutsa; editing by Ayenat Mersie