Financially battered Kenya Airways will get government support to survive the coronavirus pandemic and remain afloat.
Treasury Secretary Ukur Yatani plans were revealed through the International Monetary Fund report published Thursday.
“The authorities are developing plans to restructure Kenya Airways and anticipate providing significant financial support over the medium term,” the IMF said.
“Much of the projected $1 billion costs for KQ’s restructuring is unavoidable as the government had previously guaranteed Ksh.84.8 billion ($750 million) in debt owed by the airline, and KQ has run large arrears.”
According to the proposed plan, the government will take over Ksh.93.5 billion ($827 million) of KQ’s debt and inject Ksh.53.4 billion ($473 million) in direct budgetary support across the 2021/2022 and 2022/2023 budget cycles to clear overdue payment obligations and cover the upfront costs of restructuring.
“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,” Yatani said in a letter to the IMF.
With the proposal, the Kenyan government has dropped plans to nationalise Kenya Airways (KQ). This was to be realised through the National Aviation Management Bill 2020.
In June 2019, legislators approved the bill that was aimed at forming a holding company with four subsidiaries: Kenya Airports Authority, Kenya Airways, Jomo Kenyatta International Airport (JKIA), and a centralized aviation college.
“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,” said Treasury CS Ukur Yattani in the letter.
The Kenyan government owns 48.9 per cent of the national carrier and it is expected to buy out the remaining holders of 51.1 per cent of the shares.
Air France-KLM owns an almost 8 per cent stake in Kenya Airways.
Local lenders own a 38.1 per cent stake which they acquired in 2017 after KQ was unable to service its loans of Ksh16.9 billion.
Kenya Airways narrowed its net loss by 20 per cent to Ksh 11.5 billion in the first half of FY 2022 on a year on year basis on account of lower exceptional expenses and higher cargo volumes.