Kenya Airways Seeks Strategic Investor Amid Forex Woes and Growing Debts

Kenya Airways (KQ) is actively seeking a strategic investor to bolster its financial position as it grapples with the adverse impact of foreign exchange volatility on its turnaround efforts. Despite reporting a recent operating profit of KES998 million shillings (USD6.6 million), the majority-state-owned carrier faces mounting challenges, including forex losses and substantial debts amounting to KES196.4 billion (USD1.3 billion) as of September 31, 2023.

CEO Allan Kilavuka highlighted the depreciation of the Kenyan shilling against the US dollar as a primary factor contributing to significant forex losses. With limited government support and a portfolio of foreign currency-denominated debts, the airline sees securing a strategic investor as a crucial step to navigate these financial challenges.

During a briefing to the Parliamentary Transport and Infrastructure Committee on October 24, Kilavuka outlined Kenya Airways’ ambitious goals, including a 23% capacity growth in 2025 and 16% in 2026. However, the CEO expressed concerns about the substantial negative forex impact on operations, reaching KES26 billion (USD172.7 million) from January to September 2023. The airline anticipates an additional negative impact of KES5.5 billion (USD36.5 million) by December 2023 if the Kenyan shilling continues to depreciate.

Kenya Airways’ debts, largely denominated in dollars, include loans for aircraft purchases, such as a KES62.7 billion (USD416.5 million) facility with EXIM Bank (United States of America) for B787-8s and a KES17.6 billion (USD117 million) loan balance for ERJ 190-100ARs.

CEO Kilavuka remains optimistic about the airline’s future profitability, projecting a return to the black in the 2024 financial year. He cited a forecasted 56% increase in group revenue to KES75 billion (USD498 million) and a 43% growth in passenger numbers to 2.3 million, translating to a remarkable 131% gross profit improvement.

However, without government intervention, Kilavuka acknowledged the challenging path ahead for Kenya Airways, emphasizing the need for support to secure the airline’s viability. The Parliamentary Transport and Infrastructure Committee sought answers on key issues, including the airline’s projected financial health, debt status, the impact of currency depreciation, and strategies for operational improvement. Committee members expressed commitment to addressing these concerns and supporting policy enactment for the airline’s benefit. Stay tuned for further updates on Kenya Airways’ efforts to secure a strategic investor and overcome its financial hurdles.