- The Kenyan carrier reported a $29 million net loss in 2022.
- Kenya Airways defaulted on its repayment obligation of $841.6 million loan from the US Export-Import Bank in 2017.
- KQ chairman Michael Joseph claimed there are no plans to offload its shares to Delta Airlines.
The initial plan by the Kenyan government to form an airline partnership with Delta Airlines has gone off the radar as KQ Airlines sets its sights on working out a partnership with South Africa Airways.
This sudden change of direction comes days after the Kenyan Flag carrier reported a $29 million net loss in 2022. According to KQ, partnerships with regional carriers would sustain its current operations long-term while discarding those that appear unnecessary.
Kenya Airways Initial plans for Delta Airways
A drastic change has arrived with Kenya’s new government, President William Ruto who has indicated that the government is not keen on bailing out the loss-making national carrier.
In 2022, President Ruto told Bloomberg that the government is prepared to sell its entire stake in Kenyan Airways. When questioned about this drastic move, Ruto claimed that he is in the business of running a country, not an Airline carrying its flag.
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He further claimed that the government is looking for potential airline partnerships. This initiative aims to salvage Kenya Airways from the excessive losses experienced in the past two years. American Delta Airlines was one of the first promising organizations willing to buy KQ.
Ruto’s sudden decision was not without reason. Kenya Airways defaulted on its repayment obligation of an $841.6 million loan from the US Export-Import Bank in 2017, and it used this loan to develop seven aircraft and one engine. Unfortunately, due to the Covid Pandemic, the airline experienced heavy losses.
These unforeseen circumstances caused the Kenyan government to take over the repayment and pay up to $525 million, which it did not budget for. The Kenyan Government’s stake in KQ is 48.9%, while Air-France-KLM is 7.8%. Ten local banks control 38.1% after loans to KQ was converted to a stake, while employees hold 2.4% and other shareholders 2.8%. According to Ruto, Kenya Airways has eventually become a liability for the country. Selling its stakes is one way to achieve his long-term goal of elevating the country from debt.
Kenya Airways abandons Delta deal
During the investor briefing in the last week of March, KQ chairman Michael Joseph stated there are no plans to close the deal with Delta. The Kenyan airline has said that despite the government’s attempt to intervene in its current financial dilemma, Kenya Airways is set on following potential partnerships. Rather than ultimately selling its stakes to foreign countries, this is its preferred method.
He further claimed that there are no plans to offload its shares to Delta Airlines. As Allan Kilavuka, KQ CEO, stated, other potential airlines within Africa are willing to form an Airline partnership that benefits both parties.
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During the US-Africa Leaders’ Summit, President Ruto claimed he wished to make Kenya Airways profitable by whichever means possible including selling it to profitable airlines or foreign governments.
Out with Delta in with SAA
Kenya Airways did not refute the initial dealings with Delta without having a potential plan. On the contrary, KQ is potentially eyeing an Airline partnership with South African Airways (SAA), given the recent good relations between both nations.
In 2022, both organizations signed a Strategic Partnership Framework. If properly implemented, it would improve the financial viability of both carriers. This is made possible by cutting costs and increasing the size of the available fleet at their disposal through code sharing. It will potentially lead to a new pan-African airline group within the year.
According to the airline partnership, Kenya Airways seeks to use Johannesburg as a stopping point to pick up passengers to London or Abuja. This move will solve several of South African Airways’ problems. In addition, it would also provide additional routes for both carriers, increasing their scope of business.
SAA has faced financial turmoil for the past decade, forcing it to halt its operations for some time. Fortunately, it recently resumed its services in 2020. This airline partnership will open more doors for the carrier. In addition, KQ will avail several aircraft for the airline to use during the agreed terms.
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Kilavuka has stated that KQ is also looking for potential partners within the West Africa region. This will form a pan-African airline association interconnecting major African carriers.
Despite backing down from the Delta deal, KQ will maintain all its shareholding while looking for potential partners rather than selling off its remaining shares.
