To address the financial concerns of Kenya Airways (KQ), the State will provide the carrier with the additional support of 34.9 billion shillings (around US$283.2 million) in the 2022-2023 financial year.
Supporting the State carrier
Kenya Airways has been in financial disarray for quite some time now, owing around 102.82 billion shillings (or US$835 million) in debt. The airline’s debt was heavily increased by the COVID-19 pandemic. As reported by local media outlet Zawya, the carrier has payables owed to aircraft lessors, operation, maintenance costs, landing, and rental fees, fuel costs, rent, navigation, handling charges, and taxes. This total, around $194 million is currently overdue.
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This was reported in a letter of intent sent by Kenya’s National Treasury & Planning Cabinet Secretary and Central Bank to the International Monetary Fund managing director, Kristalina Georgieva.
The Kenyan Treasury also said that previous bailouts to the State carrier had already brought more stability to the airline, reducing its operating losses in the first half of 2022 by 31.5%. The Treasury added that the airline would have had a profit in the absence of higher fuel prices. “Commercial performance, paired with initiatives under the restructuring plan, has already had a positive impact on KQ’s solvency issues.”
Nonetheless, the Kenyan government understands that more has to be done to help the struggling State carrier. Therefore, as part of the airline’s restructuring, Kenya Airways will optimize its network, cutting 12 loss-making routes, in addition to the previous cessation of services to 16 destinations globally. Some of the destinations Kenya Airways has stopped flying to (comparing Cirium data between December 2022 and 2019) are Maputo (MPM), Luanda (LAD), Djibouti (JIB), Geneva (GVA), Brazzaville (BZV), and Bamako (BKO ).
The airline is also looking to renegotiate the operating leases of its fleet. According to data by ch-aviation, Kenya Airways has a fleet of 32 aircraft, including two Boeing 737-300(SF)s, eight Boeing 737-800s, nine Boeing 787-8s, and 13 Embraer E190s. Some of these planes could be repurposed as freighters to support Kenya’s cargo business.
Finally, Kenya Airways would also be interested in reducing the size of its staff, reaching new collective bargaining agreements, and significantly reducing costs relating to the operation, maintenance, distribution costs, ticketing, procurement, and fuel. The set is to reduce these costs by $120 million per year by 2024.
Looking to sell Kenya’s State carrier
Additionally, the Kenyan government is looking for anyone to partner with. The idea would be to sell the stake to interested private buyers looking to keep the airline in business. Earlier this month, Kenya’s newly elected president, William Ruto, spoke about the airline while participating at the US-Africa Leaders Summit in Washington, DC. Hey said,
“I’m willing to sell the whole [of Kenya Airways]. I’m not in the business of running an airline that just has a Kenyan flag; that’s not my business.”
During his visit to the United States, Ruto reportedly met with Peter Carter, the Executive Vice President of External Affairs at Delta Air Lines. He said that any discussion with the US carrier is at a preliminary stage.
Do you think Kenya Airways should receive this State support, or should the government continue looking for buyers? Let us know in the comments below.
Source: ch-aviation, Zawya.