Kenya Airways to receive US$91.4m bailout from the government

KENYA – National carrier Kenya Airways (KQ), has received US$91.4 million from the Kenyan government as part of efforts to prop up the carrier after the Covid-19 pandemic grounded airlines globally.

The airline, which is 48.9% owned by the government with Air France-KLM holding a small stake, secured US$71.3 million from Kenya’s National Treasury and US$18.3 million from the ministry of transport, Business Daily newspaper reported, citing a supplementary budget presented to parliament for approval.

Kenya Airways has not commented on the report, which did not say when the airline had received the funds.

According to the International Air Transport Association (IATA), African airlines have struggled, potentially losing US$6 billion in passenger revenue during 2020, after Covid-19 pandemic grounded much of the global aviation and tourism industry.

In January, an internal memo seen by Reuters showed the airline was planning employee pay cuts of as much as 30% for six to 12 months, a move that has been fiercely opposed by the airline’s staff led by the pilots.

Chief Executive Officer Allan Kilavuka said in the memo that the company was grappling with an unsustainably high level of debt.

A draft law on nationalising the airline has been submitted to the East African nation’s parliament and trade in the company’s shares on the Nairobi Securities Exchange (NSE) has been suspended since July as the carrier works on a restructuring plan.

“Under the model approved by Kenya Parliament, Kenya Airways will become one of four subsidiaries in an aviation holding company”

Kenya Airways said in August that it expected its full-year 2020 revenues to drop by between US$548.3 million and US$639.70 million and reported first-half pre-tax losses of US$131.2 million.

Cabinet Secretary for Treasury Mr. Ukur Yatani last year said that the Treasury was keen to pursue a turnaround under the plan to nationalise Kenya Airways, which was approved by lawmakers in July 2019.

Kenya wants to emulate countries like Ethiopia which run air transport assets, from airports to fuelling operations under a single company, using funds from the more profitable parts to support others.

Under the model approved by Kenya Parliament, Kenya Airways will become one of four subsidiaries in an aviation holding company.

The others will be Jomo Kenyatta International Airport, an aviation college, and the Kenya Airports Authority, which will operate all other airports.

The State bailout comes less than a year after Kenya Airways received a US$45.7 million loan from the Treasury, a move that increased the national carrier’s indebtedness to the government,  its top shareholder.

KQ’s problems have been linked to a mix of increased competition, mismanagement and a previous debt binge that continues to weigh heavily on its balance sheet.

Liked this article? Subscribe to DealStreet Africa News, our regular email newsletter with the latest news, deals and insights from Africa’s business, economy and more.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.