Nairobi unlikely to bailout cash-strapped Kenya Airways

Kenya’s National Treasury has neither budgeted for, nor received a call from cash-strapped Kenya Airways (KQ, Nairobi Jomo Kenyatta) for a fresh financial bailout of close on USD500 million, reports The EastAfrican newspaper.

It quotes Stanley Kamau, the acting director-general in charge of Public Investments and the Portfolio Management Directorate at the National Treasury, that the government is unaware of new funding requests from the airline, and more importantly, that no allocation for such expenditure has been factored into the budget for the current (2021/22) fiscal year. “We have not received any bailout request from Kenya Airways. We have not discussed this bailout with KQ. I’m not sure they asked for USD500 million for I haven’t seen such a request,” he said.

Briefing investors on the airline’s half-year results ending June 2021, Kenya Airlines chief executive Allan Kilavuka earlier this month said the airline was technically insolvent and needed continued government support to fund its operations to year-end as it remained in a “precarious financial position”.

The EastAfrican reported that Kilavuka had told it in March that the carrier needed an immediate cash injection of USD499.77 million to cover short-term debt and shore up its depleted working capital, but that the government had only disbursed KES25 million (USD227,500), since the last financial year.

“The airline has received KES25 million. We are extremely appreciative of the support we have received so far, considering the many industries government is supporting in these unprecedented times,” Kilavuka now said in an emailed response to the newspaper.

Kenya Airways’ liabilities outstripped its assets by KES73.8 billion shilling (USD672.3 million) by June 30, 2021. It posted a net loss of KES11.48 billion (USD104.36 million) during the six months to June 30, down from a net loss of KES14.32 billion (USD130.18 million) in the same period last year. The reduction was helped by diversification into cargo and charter flight operations as passenger numbers shrank during the pandemic, wiping out passenger revenues. The carrier’s employees have accepted pay cuts of up to 30% since January 2021 to help the airline survive the current health crisis.

Last year, Treasury Cabinet Secretary Ukur Yatani said the state was keen on a long-term solution anchored on the nationalisation of Kenya Airways, rather than short term financial bailouts. However, a draft law that allows the state to take over the 44-year-old airline has been delayed in parliament as other national matters took precedence during the pandemic.

National Assembly Transport Committee chairperson David Pkosing said the National Management Aviation Bill 2020 was awaiting scheduling for debate and might be discussed when parliament returns from its current recess.

Kenya Airways’ stock was suspended from trading on the Nairobi Stock Exchange on July 3, 2020, in anticipation of the planned nationalisation following the publication of the Bill on June 18, 2020.

In March 2021, the National Assembly was to have debated and voted on the Bill to allow it to progress to the next stage — the third reading or the amendment stage. However, it was withdrawn from business during a special sitting after lawmakers threatened to shoot it down protesting delays by the Treasury to release their National Government Constituency Development Fund money. According to House rules, any Bill lost at the debate stage can only be reintroduced after six months.

Kenya Airways is 48.9% owned by the government, with a group of 10 lenders holding 38.1%, Air France-KLM 7.8%, employees 2.4%, and others at 2.8%.