Treasury has announced plans to support national courier Kenya Airways (KQ) to the tune of Ksh. 113 billion to survive the COVID-19 pandemic and remain afloat. The announcement was made through a recent International Monetary Fund report.
According to the proposed plan, the government will take over Ksh. 93.5 billion ($827 million) of KQ’s debt and inject Ksh. 53.4 billion ($473 million) in direct budgetary support across the 2021/2022 and 2022/2023 budget cycles. This amount will clear overdue payment obligations and cover the upfront costs of restructuring. With the proposal, the Kenyan government has dropped plans to nationalize KQ. This was to be realized through the National Aviation Management Bill 2020.
“The authorities are developing plans to restructure Kenya Airways and anticipate providing significant financial support over the medium term. Much of the projected Ksh. 113 billion ($1 billion) costs for KQ’s restructuring is unavoidable as the government had previously guaranteed Ksh. 84.8 billion ($750 million) in debt owed by the airline, and KQ has run large arrears,” read part of the IMF report.
In June 2019, legislators approved the bill that was aimed at forming a holding company with four subsidiaries. These are the Kenya Airports Authority, Kenya Airways, Jomo Kenyatta International Airport (JKIA), and a centralized aviation college. The Kenyan government currently owns 48.9% of KQ and it is expected to buy out the remaining holders of 51.1% of the shares.
Additionally, Air France-KLM owns an almost 8% stake in Kenya Airways. Local lenders own a 38.1% stake which they acquired in 2017 after KQ was unable to service its loans of Ksh. 16.9 billion. KQ narrowed its net loss by 20% to Ksh 11.5 billion in the first half of FY 2022 on a year on year basis on account of lower exceptional expenses and higher cargo volumes.