The government says its decision to inject funds into ailing national carrier, Kenya Airways, is an informed choice to support the airline through capital restructuring to enable it remain operational.
Following the move, the government will be the largest shareholder to a tune of 48.9% from the current 29.8%, which National Treasury Cabinet Secretary Henry Rotich says will go a long way in reducing the company’s financial strain.
“Kenya Airways is a strategic national asset and plays an important role to our economy and, therefore, the need for government to come in to enable trade and economic growth within Kenya and the East African region,” he added.
The CS noted that the financial restructuring will restore the confidence of key stakeholders where the government has provided contingent guarantee amounting to Ksh 75 billion to the operating asset lessors and lenders.
This follows a deal proposed by the airline that will see 11 local banks convert Ksh 17.3 billion of the Ksh 22.5 billion in loans issued to the airline into equity.
The shares will be owned by a new special purpose vehicle called KQ Lenders Company managed by Minerva Fiduciary Services from Mauritius.
“The move is to harness the power of the private sector by encouraging shareholders to take up both equity and financing opportunities to enable the airline restructure its operations and return to profitability,” Rotich stated.
Speaking during the signing of the financial deal late on Monday, Transport James Macharia said Kenya Airways contributes 10% of the Gross Domestic Product (GDP) and, therefore, a strategic investment for the country.
“The airline is critical to the economy as it enables other sectors such as trade and tourism to move on making our country to be a strategic economic hub in the region,” Macharia stated.
He added that the country is realizing major investment at the Jomo Kenyatta International Airport since the airport has recently acquired the category 1 status and will soon have direct flights to the United States.
He said by 2013, the airport will have the capacity to enable movement of 12.5 million people per year.
“We are at an advanced stage in the development of the second run way, and will open more routes to ease the movements of people and goods,” Macharia explained.