Documents made public by the International Monetary Fund (IMF) on Thursday, December 23 have offered insight into the State’s plan for beleaguered national carrier Kenya Airways (KQ).
The government has dropped its plan to fully nationalize the carrier which currently is only partly state-owned. The plan which was greenlit by Parliament would have seen KQ delisted from the Nairobi Securities Exchange (NSE).
Now, the State is keen on taking over the carrier’s multi-billion shilling debt burden and extending a bailout through direct financial support. The state will offer Ksh53.4 billion in direct budget support in the fiscal year that ends in June 2022 and the year after.
It will take over Ksh93.4 Billion of the airline’s debt, bringing the total to be spent Ksh146.8 Billion.
Treasury Cabinet Secretary Ukur Yattani wrote: “As part of putting KQ on a sustainable footing, GoK will take over US$827 million of KQ’s debt. In addition, in FY2021/22 and FY2022/23, US$473 million will be provided as direct budgetary support to clear overdue payment obligations and cover the upfront costs of restructuring.”
In his letter to the IMF, Yattani further confirmed that the nationalization plan had been abandoned.
“The authorities do not intend to nationalise the carrier and are considering appropriate mechanisms to protect the Exchequer’s financial interests during the restructuring process,” he wrote.
In March 2021, Kenya Airways CEO Allan Kilavuka stated that the company needed a $500 million dollar bailout to stay afloat. Kenya Airways made Sh36.6 billion after-tax loss for the financial year ending December 2020 compared to Sh12.9 billion loss in 2019, as Covid-19 took a toll on the global aviation industry
“It’s [Kenya Airways] in ICU but the vitals are still working,” he stated.
In March 2021, Kilavuka had also hinted at the need for the continent to consolidate its aviation assets as “we are too small to compete”. “We need scale to survive the future and reduce costs,” he stated in a radio interview.
This too seems to be in motion, with Kenya Airways and South African Airways (SAA) in November announcing plans to establish a Pan-African airline group in 2022.