9 lives of Kenya Airways as it survives bankruptcy

  • In a letter to the International Monetary Fund (IMF), Yatani wrote that the government of Kenya would take over US$827 million of KQ’s debts as one way of making the airline self-sustainable.
  • Losses have reduced to US$114.9 million as of June 2021 in an indication of possible economic recovery for the airline.
  • Passenger numbers dropped from 5.2 million in 2019 to 1.8 million in the same year.

Kenya Airways flights to the US

It could be the proverbial nine lives but Kenya Airways (KQ) seems to always get out of its dire straits.

Covid-19 has been a major blow to Kenya Airways and restrictions on travel saw the airline record a historic loss of over US$333.2 million in the 2020 financial year.

Passenger numbers dropped from 5.2 million in 2019 to 1.8 million in the same year. But that would not seal its fate.

Kenya’s Treasury, in its attempts to fuel Kenya Airways back to profits, will offer a bailout of US$128 million (Sh146.9 billion). The state will also drop a previous objective of nationalising Kenya Airways Limited.

Ukur Yatani, Cabinet Secretary for National Treasury and Planning, said that the government will take over a debt of Sh93.4 billion owned by the airline and payable to a number of suppliers.

Read: Kenya Airways and South African Airways seek to create new Pan African Airline Group by 2023

Yatani added that the airline would also receive Sh53.4 billion from the government in both the financial year ending June 2022 and the consecutive one ending June 2023. This sums up the largest corporate bailout ever given by the state.

A Kenya Airways Dreamliner. [Photo/ Skift]
The financial boost is targeted to be used in the payment of salaries, ground planes’ maintenance, settling utility bills (security, electricity, water, and parking) and easing the effects of Covid-19.

A looming bankruptcy of the airline has necessitated the bailout. The government of Kenya owns 48.9 per cent of KQ shares, local lenders own 38.1 per cent, and Air France-KLM has about 8 per cent.

Lawmakers in Kenya had approved the nationalization of the airline in July 2019, but the state dropped the bill, saying it would have led to the scrapping of the airline from the National Securities Exchange (NSE). The bill is still before parliament.

In a letter to the International Monetary Fund (IMF), Ambassador Yatani wrote that the government of Kenya would take over $827 million of KQ’s debts as one way of making the airline sustainable. He added that GoK would provide $437 million in fiscal years 2021–22 and 2022–23 to cover the costs of restructuring the airline operations and clearing overdue debts.

Under the previous approval model by Members of Parliament, Kenya would have four subsidiaries in an aviation holding company:

  • Jomo Kenyatta International Airport
  • Aviation College
  • Kenya Airports Authority
  • Kenya Airways

Trade on the shares of the company on the Nairobi Securities Exchange has been on hold since July last year.

Read: Digital Payments to help Air Tanzania extend its wings

Yatani told the IMF in the letter that Kenya Airways will be obligated to reduce its travel network, ration travel frequency, operate a fewer number of fleets, and reduce its staff, like any other company that has been hit hard by Covid-19.

The government of Kenya’s involvement has borne fruit. This Christmas week, KQ has increased the frequency of flights to the United States from two to four a week.

Bookings have picked up and the cost of a one-way ticket has risen from US$ 900 (KSh90,000) to US$10,00 (KSh101,305). This comes as a relief to the Kenya Airways Chairman, Michael Joseph, who had earlier said in an interview with a local station in Kenya last year that the pandemic would continue to affect demand for air travel for the next two to three years.

The airline said they had increased the number of direct flights to New York to enable families to reconnect and unite during this festive season.

KQ’s losses have since reduced to US$114.9 million as of June 2021, an indication of possible economic recovery for the airline.

A Kenya Airways plane. [Photo/ KAA]
Kenya Airways resumed the American flights in November last year after a previous postponement mid-last year due to flight cancellations occasioned by Covid-19.

The increase in the number of flights hints at a good relationship between the Biden administration and the Kenyan government.

President Biden had earlier signed a proclamation barring passengers from South Africa, Botswana, Zimbabwe, Namibia, Mozambique, Lesotho, Malawi, and Eswatini from travelling to the United States.

Kenya Airways is the only East African airline that travels directly to the United States. This enables passengers from Rwanda, Uganda, Tanzania, and Burundi to connect through the Jomo Kenyatta International Airport.

The Pride of Africa has been airing promotional programmes in Kenya media in an attempt to improve its popularity.

Read: Here’s How Kenya Will Spend the Sh3.6 Trillion Budget in FY2021/22

I am a journalist who is an enthusiastic tech, business and investment news writer from across Africa. There is always something good happening in Africa but most gets lost in the stereotypes. I tell the stories that matter to the Africans for Africa. Have a tip? You can contact me at j.kangethe@theexchange.africa

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