Nairobi enlists Seabury to restructure Kenya Airways debt
The Kenyan Government has tasked Seabury Consulting, part of Accenture, to help Kenya Airways (KQ, Nairobi Jomo Kenyatta) evaluate options to restructure its debt. The retention of an international aviation consultant to prepare an in-depth financial assessment of Kenya Airways was highlighted as essential for the country’s state-owned enterprises (SOE) strategy in a report by the International Monetary Fund (IMF) in June 2021.
“Given the special circumstances and uncertainty facing the global airline industry, Kenya Airways has retained an international aviation expert to assist in defining a set of strategies for its future. Kenya Airways has experienced losses in recent years and faces significant future challenges. Sector-specific expertise will contribute to a better understanding of major trends in the regional and local aviation market, the formulation of a viable business model for Kenya Airways and ensure the consideration of all least cost alternatives for the Exchequer,” the IMF said.
Chief Executive Officer Allan Kilavuka was not immediately available for comment.
The move comes as government plans to inject another KES26.56 billion shillings (USD233.7 million) into the debt-ridden carrier and other parastatals, according to supplementary budget estimates by the National Treasury presented to Parliament.
This comes on top of KES53.4 billion (USD470 million) in direct budget support already allocated to the airline for the fiscal year ending June 2022, with the government having promised to absorb KES92.5 billion (USD814 million) of its debts accumulated by the end of 2020.
The extra allocation to the airline and other parastatals constitutes the highest of the National Treasury’s extra spending of KES108.5 billion (USD954.9 million) in the fiscal year ending June 2022, aimed at alleviating unforeseen expenditure due to a drought in parts of the country, security, a petrol subsidy, payments for COVID-19 vaccines, and a general election in August, Treasury Cabinet Secretary Ukur Yattani told the Kenyan Parliament. It also represents a 3.3% increase in the national budget presented in April 2021, thus raising the country’s fiscal deficit from 7.5% of gross domestic product (GDP) to 8.1%, reported Business Daily.
Kenya’s Business Daily reported the airline needs funds for the maintenance of grounded aircraft, payment of salaries, and the settling of utility bills, and to ease the effects of the COVID-19 pandemic on travel demand. Kenya Airways is at risk of running out of funds amid reluctance by commercial banks to extend further liquidity.
The government, which owns 48.9% of the airline, last year decided to reverse earlier plans for its renationalisation.