Kenya Airways will receive a $176 million cash injection from the Kenyan government as it battles to stay afloat after years of loss. At the end of 2020, the airline’s total debt was estimated at $846 million. The action follows the Kenyan government’s decision to shelve ambitions to nationalise the struggling airline.
After years of financial losses and mounting debt, Kenya Airways will receive a $176 million rescue from the Kenyan government. The cash injection was outlined in the Kenyan parliament’s supplementary budget documents.
The airline’s difficulties commenced even before the pandemic, but they’ve only gotten worse as passengers and income have dried up with globally affected COVID-19 travel restrictions. Total debts reached $846 million by the end of 2020 and are expected to have increased further since then, owing to COVID-19’s influence.
The Kenyan government has a 48.9% interest in the airline has backed its debts with $750 million in guarantees. Kenya’s National Treasury also turned $217.4 million in debt owing to the government by Kenya Airlines into equity.
Kenya Airways may need to rework its business model
Kenya Airways and other state-owned firms will receive a total of $234 million in bailout funding from the government. Kenya Airways is working with Seabury Consulting, a unit of professional services major Accenture, to restructure its loans. The consultant firm will lead Kenya Airways’ debt restructuring, which is expected to cost upwards of $1 billion.
“KQ, as the airline is known, needs to overhaul its business model to minimise the burden it places on the state given the aviation industry’s challenges amid the pandemic,” Bloomberg quoted the International Monetary Fund (IMF) in a report.
Kenya’s Treasury told the IMF that some of the country’s cost-cutting efforts would include lowering the size of Kenya Airways’ fleet, slashing its workforce, and reducing flight frequency.
According to Simple Flying, the Kenyan government abandoned intentions to nationalise the airline in favour of alternate restructuring options. The ideas for nationalisation have been on the table for years, with the Kenyan Parliament voting in support of them in July 2019.
When the COVID-19 epidemic struck, the progress stalled and was made worse. By December 2021, the plan had been abandoned, favouring the carrier’s current restructuring process.