Top managers at Kenya Airways will likely lose their jobs before government releases a proposed bailout package, Treasury Secretary Henry Rotich said yesterday, as the fate of the national carrier remained unclear.
The CS told a Senate joint committee looking into the affairs of KQ that the Government had demanded major changes, including management restructuring. “We need to know what caused the loss before having the managers resign,” he said Tuesday at Parliament buildings.
The KQ management has been blamed for poor decisions that led to the airline posting a record loss of Ksh25.7 billion in the 2014/2015 financial year. Among the poor decisions is the lack of foresight in the ambitious Mawingu expansion project and bad decisions on leasing of aircrafts.
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The government is considering a Ksh60 billion bailout for KQ. To ensure that the company keeps afloat, the government has provided short-term support by way of a shareholder loan of Ksh4.2 billion. The amount is intended to help the airline meet its financial obligations, particularly paying off crucial creditors like fuel suppliers.
Additionally, the government has provided support to KQ to access a Sh20 billion bridging facility from Afrexim Bank for working capital. Mr Rotich said the short term facility and will be received in two tranches of Ksh10 billion each.
The government owns 29.8% of the ordinary shares of Kenya Airways Ltd, KLM owns 26.73% and IFC owns 9%. Mr Rotich said KLM and IFC were waiting for the restructuring plan from KQ management before deciding whether to participate in the bailout or not. “For those shareholders, it’s wait and see. But for us, we had to come up with a plan on an interim basis to keep the airline in business,” he said.
Issues surrounding the Sh25.7 billion loss include flat revenue growth, a 107 per cent increase in fleet ownership costs, 17 per cent increase in total overheads and losses of fuel hedging.
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