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KQ receives another Sh36.6 billion state bailout

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By Judith Gicobi

Kenya Airways (KQ), like other airlines around the world, was hit hard by airspace closures in 2020 as countries attempted to stem the transmission of the coronavirus.

Last year, things began to improve, according to KQ, with sales increasing by a third to Sh70.22 billion.

The renegotiation of plane leasing arrangements, which resulted in massive gains, assisted to reduce total expenditures by 3.6 percent.

However, the national carrier still requires funds for plane servicing, salary payments, and the payment of utility bills like security, water, power, and parking, and also the alleviation of the virus’s consequences.

Without government assistance, the airline faced running out of money in the coming years, owing to banks’ reluctance about funding African airlines.

The rescue comes after the government abandoned its preferred long-term plan for the struggling KQ, which was based on nationalization.

The airline would have been delisted from the Nairobi Securities Exchange (NSE) under the nationalization strategy agreed by MPs in July 2019.

Parliament is debating a bill that would lay the groundwork for the airline’s nationalization, which had been suggested prior to the outbreak.

Kenya sought to follow in the footsteps of Ethiopia, which has a single business that manages all aspects of air transportation, from airports to fueling services, and uses funds from the more profitable areas to assist the less profitable parts.

KQ would have been one of four affiliates under an aviation holding company under the plan authorized by MPs.

Jomo Kenyatta International Airport, an aviation college, and the Kenya Airports Authority, which operates all other airports.

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KQ shares are owned by the government to the tune of 48.9%.

The NSE has stopped trading in the company’s shares since July 2020 as the airline focuses on a reorganization plan.

On the back of the multi-billion shilling bailout, the government is now pressing for the carrier’s reorganization.

Under the bailout terms, KQ will be compelled to decrease its network, run a smaller fleet, and perhaps lay off additional employees.

 

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