Kenya Airways looks to gov’t to absorb $250mn debt mountain

Kenya Airways (KQ, Nairobi Jomo Kenyatta) is in discussion with the country’s treasury over the settlement of the airline’s USD250 million debt accrued during the pandemic, says Chief Executive Officer Allan Kilavuka.

In an interview with Bloomberg, he said that wiping out the liabilities, including debt to aircraft lessors and suppliers, would assist the airline in executing its recovery- and cost-cutting turnaround plan which is being devised in consultation with London-based consultants Steer Group.

“What we are focusing on is to have the least-cost actions to the shareholder,” he said. “That is what the strategy is going to focus on, that we are right-sized, we have the least possible cost, and that we have the best possible productivity from the assets and from our employees.”

Kenya Airways recently completed International Monetary Fund (IMF) evaluations intended to inform the turnaround plan and minimise expenses to state coffers while ensuring the delivery of key restructuring milestones. The National Treasury has previously guaranteed USD750 million of the airline’s debt.

The government, which owns 48.9% of Kenya Airways, wants to renationalise it, but the necessary bill has been hamstrung by parliamentary processes; while it has passed parliament on its first and second readings it still needs to be read a third time.

Kilavuka earlier told The Africa Report that Kenya Airways would need to ask its lenders for more deferrals of capital repayments. He said the airline had only been paying the interest on its loans. “So far lenders have been understanding,” he said. The airline’s problems predate the pandemic, having reported losses since 2012.

Meanwhile, Kenya Airways expects capacity to return from a current 55% to 65% next year compared to pre-COVID levels. Kilavuka said domestic routes were back to 80% of normal levels and set to reach 90% by year-end. A return to 2019 levels would take until mid-2023, he said. The airline is in no rush to add routes in the short-term after it had to suspend seven last year to preserve cash, he added.